Contracting out of Government Services Second Report

Table of Contents

CHAPTER 5

COMMERCIAL CONFIDENTIALITY

Introduction

In the previous chapter, the committee briefly considered in general terms the issue of governments' handling of parliaments' requests for information deemed to be confidential, for whatever reason. In this chapter, the committee considers the issues specifically relating to information deemed commercially confidential.

Commercial confidentiality has always been a contentious issue between parliaments and governments. At first, procurement issues were the cause. With the establishment in the 1980s of government business enterprises and units in government departments which operated on a commercial basis, the problems have accelerated.

It is axiomatic that, in order to know whether a government contract that has been entered into is sound and represents value for money, parliamentarians or their representatives must be able to access details of the contract. It has been a general parliamentary experience in Australia that most such contracts are deemed by governments to be commercially confidential and therefore unavailable for scrutiny by interested parties, including parliamentarians. In the federal sphere, the general practice in the case of significant contracts is for the relevant minister to announce by press release the awarding of the contract, name the successful tenderer and state the all-inclusive cost. Brief details of all contracts worth more than $2000 are also listed in the Government Gazette and similarly, brief details of contracts of any size are included in the annual report information which must be made available by agencies on demand, if it is not published in the report itself.

The United States appears to have a more robust attitude to freedom of commercial information. The committee was told that US state government contracts are generally available for public scrutiny once the contract is signed. [1]

What is commercial confidentiality?

Commercial confidentiality is a nebulous concept. The Freedom of Information Act 1982 (FOI Act) describes it in general terms in Part IV under documents exempt from disclosure:

43. Documents relating to business affairs etc.

(1) A document is an exempt document if its disclosure under this Act would disclose:

(a) trade secrets;

(b) any other information having a commercial value that would be, or could reasonably be expected to be, destroyed or diminished if the information were disclosed; [etc.]

The guidelines for official witnesses before federal parliamentary committees, which consider the question of public interest immunity and its scope, rely in part on the exempt provisions of the FOI Act, though the guidelines are at pains to stress that the provisions of that Act have no actual application to parliamentary inquiries but `are merely a general guide to the grounds on which a parliamentary inquiry may be asked not to press for particular information'. [2] Public servants might be justified in seeking to give evidence to a committee in camera in the case of `evidence the public disclosure of which would … reveal business affairs, including trade secrets or other commercially sensitive information'. [3]

The general principles enunciated in the guidelines lean heavily in favour of disclosure – `it is intended, subject to the application of certain necessary principles, that there be the freest possible flow of information between the public service, the Parliament and the public' and `it may be in the public interest to provide to the committee a document or information for which exemption would normally be claimed under the [FOI]Act' with exemptions in that Act needing to be `viewed from the perspective of the proper role and functions of the Parliament'.

Other Commonwealth legislation addresses the question of the publication of `sensitive' commercial information. The Auditor-General Act 1997, under s.37 (2) (e) prohibits the Auditor-General from including in a public report any information which `would unfairly prejudice the commercial interests of any body or person' and under s.37 (3) the Auditor-General is prohibited from disclosing such information to a House of the Parliament, a member of a House of the Parliament or a parliamentary committee. Further, under s.37 (1) (b) the Attorney-General is given the power to issue a certificate to the Auditor-General, stating that in his opinion the disclosure of certain information would be contrary to the public interest.

As this legislation has only recently come into operation, there has been insufficient time to assess its impact. The committee expects that the Auditor-General, as an independent officer of the parliament, will be robust in his assessment of where the balance lies between the public interest and commercial interests.

Whether certain commercial information falls within the above confidentiality definitions is, however, a subjective judgment and one that has been frequently disputed before the Administrative Appeals Tribunal. “Trade secret” is not defined in the FOI Act. In a recent review of that Act, it was accepted that an express exemption for trade secrets was necessary to ensure certainty of protection for third parties' intellectual property rights. [4] The review also considered the public interest test implied in the use of the word “unreasonably” and noted that most state FOI legislation has a public interest test for all elements of the equivalent exemption. The review, however, concluded by not recommending any change to s.43 regarding the public interest.

In evidence to the committee, there was no consensus on whether contracts should necessarily be classified as commercially confidential. Dr Lewis suggested that once an information technology contract was signed, commercial-in-confidence concepts were irrelevant:

I have never found a vendor or an agency that has insisted on information being held commercial-in-confidence after the contract has been signed. There are protections of the information whilst you are doing the evaluation and so on to make sure the information does not leak out, and we separate technical evaluation from financial evaluation and never the twain shall meet until it comes together in the final decision making process, but the figures that the Commonwealth is paying for, in my experience, have not been hidden or suppressed. [5]

The New South Wales Auditor-General, Mr Tony Harris, agreed that the confidentiality status of commercial information depended primarily on the time-frame:

it appears to me that there should be a very clear demarcation between commercial information which is ex ante, before a decision is made relevant to that information, and commercial information which is ex post – that is, decisions have been made. Tender documents provided before the tender decision is made are particularly commercially sensitive, because a decision has not been made and because the benefits and rights attaching to that information can be usurped by others should that information be given out. After the decision is made, I think the information is of very little value in a commercially confidential sense. [6]

He explained that for large contracts, both the government and the private sector have hundreds of people involved in examining them, from lawyers to technical experts, and hence confidentiality could not easily be ensured for long.

Commercial confidentiality and the Senate

Documents which might be deemed to be commercially confidential, however defined, are frequently sought by parliamentarians, either in debate in a chamber or in the course of committee proceedings. It is an issue common to most parliaments, which address it in various ways. The Senate, for example, has evolved the following procedures to handle claims of commercial confidentiality, depending on the forum in which the claims are made and whether the claimant is the government or a private citizen.

The Standing Orders which govern proceedings of the Senate recognise that there are categories of material the disclosure of which is not in the public interest:

168. (1) A document relating to public affairs quoted by a Minister may be ordered to be laid on the table, unless the Minister states that the document is of a confidential nature ... [emphasis added]. [7]

This order is of relevance only to proceedings in the Senate chamber and is invoked infrequently. No guidance is provided in the Standing Orders as to what matters might be so covered but much clerkly advice has been offered on the subject. Among the issues from recent Senate debate or responses to questions on notice which have been asserted to be commercially confidential include:

• annual supplies under contract of uranium concentrate to France; [8]
• names of unsuccessful tenderers for a major aircraft runway; [9] and,
• cost of chartering a ship (because of confidentiality clauses in contract); [10]

Many of the parliamentary clashes over the confidentiality status of information arise not from proceedings in the Senate chamber but from committees. Senate committees have the power to 'send for persons and documents' and to take evidence in public or in private session, [11] with the exception of legislation committees considering estimates, whose powers are restricted to taking evidence in public. [12]

Committees, particularly reference committees, normally invite witnesses to give evidence but have asserted the power, and have been known to exercise that power, to summon witnesses and documents. Witnesses so summoned have protections as outlined in the Senate Privilege Resolutions, the first of which states, inter alia:

In their dealings with witnesses, all committees of the Senate shall observe the following procedures:

(1) A witness shall be invited to attend a committee meeting to give evidence. A witness shall be summoned to appear (whether or not the witness was previously invited to appear) only when the committee has made a decision that the circumstances warrant the issue of a summons.

(2) Where a committee desires that a witness produce documents relevant to the committee's inquiry, the witness shall be invited to do so, and an order that documents be produced shall be made (whether or not an invitation to produce documents has previously been made) only where the committee has made a decision that the circumstances warrant such an order. [13]

When a committee compels evidence from a reluctant witness, the resolutions provide for certain protections:

1. (7) A witness shall be offered, before giving evidence, the opportunity to make application, before or during the hearing of the witness's evidence, for any or all of the witness's evidence to be heard in private session, and shall be invited to give reasons for any such application. If the application is not granted, the witness shall be notified of reasons for that decision.

(8) Before giving any evidence in private session a witness shall be informed whether it is the intention of the committee to publish or present to the Senate all or part of that evidence, that it is within the power of the committee to do so, and that the Senate has the authority to order the production and publication of undisclosed evidence.

Privilege Resolution 1(10) provides that if a witness is required to answer a question, the witness `shall be required to answer the question only in private session unless the committee determines that it is essential to the committee's inquiry that the question be answered in public session'. Should a witness decline to answer a question, resolution 1(10) requires the committee to report the facts to the Senate. This committee is unaware of any cases following the adoption of the Privilege Resolutions in 1988 in which a committee has reported to the Senate on non-compliance from a private witness, though it is aware of instances when committees have determined not to press its requests. A refusal to provide information could trigger a referral of the matter by the Senate to its Committee of Privileges to determine whether a contempt of the Senate had been committed and, if so, whether the penalties outlined should be applied.

Where the witness is a public servant, Privilege Resolution 1(16) affords certain additional protections: the public servant `shall not be asked to give opinions on matters of policy, and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister'. A refusal by a minister to respond may lead to an order of the Senate to provide the information and, if the minister failed to comply, a censure motion as described in the Casselden Place case study below. The Senate generally prefers to take no action against public servants who have denied information to the Senate or a Senate committee on the instructions of a minister, preferring instead to take the matter up with the minister concerned.

To put the issues in context, recent examples of claims of commercial confidentiality made in the estimates context have included the following:

• exact details of funding of programs under the Development Import Finance Facility (DIFF) scheme; [14]
• scoping study on the valuation of Artbank; [15]
• copies of Australian Workplace Agreements; [16]
• contingent liability of Jindalee Operational Radar Network for Telstra; [17]
• price breaks in the Department of Veterans' Affairs contract with Integrated Systems Solution Corporation (ISSC); [18]
• Defence Science and Technology Organisation income from royalties and licence fees; [19]
• projected Defence property disposals; [20]
• aspects of a meatwork's debt history and Australian Quarantine and Inspection Service recovery activity; [21] and,
• subcontracting of consultancies. [22]

The committee has doubts whether every aspect of all of the above would stand up to serious scrutiny as being legitimately commercially confidential.

In camera evidence

For committees having the power to take evidence in camera, one response to a commercial confidentiality claim is for the committee to offer to take such evidence in that manner. This option is unavailable to committees considering the estimates, whose powers extend only to receiving evidence in public. A growing practice is for such a matter raised in estimates to be dealt with by the committee's agreeing to examine the issue in a separate inquiry under its general powers which allow it to receive evidence in camera. Recent estimates examples involving contractual information have included the case of the marketing of the Disability Reform Package, which was referred to the Community Affairs References Committee; [23] and the case of the contractual dispute between the CSIRO and Charter Pacific, when the Economics Legislation Committee agreed to hear matters in camera under its general inquiry powers.

Whether receiving evidence in camera is an adequate means of handling an accountability issue is questionable. In his submission to the committee, the Clerk of the Senate, Mr Harry Evans, voiced his support for the practice:

The underlying principle should be that if information can be disclosed to the government on a confidential basis there is no reason for its not being disclosed to a parliamentary committee also on a confidential basis. The commercial-in-confidence principle militates, in appropriate cases of apprehended damage to commercial interests, against the publication of information, not against the provision as such of the information. Any claim that information is commercial-in-confidence should therefore be met by the question: what is the damage to commercial interests that may result from the publication of the information, and the purpose of this question should be to determine whether information is treated as in camera evidence rather than as public evidence [emphasis added]. [24]

The question of extending in camera powers to committees in their examination of estimates has been discussed almost from the time of inception of the committees. The view has been frequently expressed that it would be pointless to give those committees the power to receive confidential information as, if the information revealed something untoward, the committee would be constrained in what it could properly do with the information. Even though committees are now empowered to reveal confidential information in some circumstances, as discussed below, to do so would run the risk of incurring opprobrium and reducing the likelihood that future confidential information would be provided.

In considering the provision of information on a confidential basis, the question of its remaining confidential is often an underlying and generally unspoken concern. There is a very real risk that in the event that an apparent scandal were disclosed, the information would be 'leaked' in any event. Penalties for the unauthorised disclosure of evidence are enshrined in the Parliamentary Privileges Act 1987:

13. A person shall not, without the authority of a House or a committee, publish or disclose-

(a) a document that has been prepared for the purpose of submission, and submitted, to a House or a committee and has been directed by a House or a committee to be treated as evidence taken in camera; or

(b) any oral evidence taken by a House or a committee in camera, or a report of any such oral evidence,

unless a House or a committee has published, or authorised the publication of, that document or that oral evidence.

Penalty: (a) in the case of a natural person, $5,000 or imprisonment for 6 months; or

(b) in the case of a corporation, $25,000.

As has been pointed out, there are practical difficulties associated with the use of this power, including, for example, the unfairness of imposing a penalty on a public servant who acts on the direction of a minister. [25] These penalties do not appear to act as a sufficient deterrent, as the history of both federal Houses' Privileges Committees will attest. The committee suspects that much 'unauthorised disclosure' goes unreported; none of the five cases that have been referred to the Senate Privileges Committee has resulted in the imposition of a penalty and in most cases, the person responsible for the disclosure has not been identified. Understandably, that committee finds 'leak' inquiries 'frustrating and ineffectual'. [26]

Individuals and public authorities would be wise to be wary about providing information in confidence to Senate committees, as they cannot receive a guarantee that the confidence will be respected. Apart from the danger of unauthorised leaking, as mentioned above, there is a perfectly legitimate means provided by Senate Standing Orders as amended on 13 February 1997 for a senator to disclose confidential information:

37.(2) A Senator who wishes to refer to in camera evidence in a dissenting report shall advise the committee of the evidence concerned, and all reasonable effort shall be made by the committee to reach agreement on the disclosure of the evidence for that purpose. If agreement is not reached, the Senator may refer to the in camera evidence in the dissent only to the extent necessary to support the reasoning of the dissent. Witnesses who gave the evidence in question shall, if practicable, be informed in advance of the proposed disclosure of the evidence and shall be given reasonable opportunity to object to the disclosure and to ask that particular parts of the evidence not be disclosed. The committee shall give careful consideration to any objection by a witness before making its decision. Consideration shall be given to disclosing the evidence in such a way as to conceal the identity of persons who gave the evidence or who are referred to in the evidence.

Further, the President of the Senate is empowered to release that information after 30 years. [27]

While to the best of the committee's knowledge, there has been no disclosure of confidential contractual information in dissenting reports, no cast-iron guarantee that the information will not be disclosed can be given to persons who might be disposed to providing such information. Apart from the formal privilege cases referred to above, the committee is aware of anecdotal evidence to suggest that there has been some informal leaking of material provided in confidence. While all responsible members of parliament seek and use information in the public interest and for proper purposes, it must be acknowledged that others do not. The chief protection against such abuse is through the disapproval of fellow members. This depends for its efficacy on the maintenance of high moral standards. Unless parliaments are prepared to exercise more discipline over their members and staff who transgress in this regard, it is questionable whether they should be entrusted with confidential information of this kind.

The harsh reality surrounding executive claims of commercial confidentiality is that they are unlikely to be believed, even when justified, because of their suspected use in the past to hide sloppiness, extravagance, incompetence - or worse - in the expenditure of public money. Hence the enthusiasm on the part of non-government senators and members to pursue such matters. This is a pity because, in an increasingly commercialised environment, there will be cases when commercial confidentiality, at least in the short term, may be a perfectly legitimate reason for the non-provision of information. And by interposing in the equation private sector players who may not previously have had to contend with public interest questions, determination of public interest claims will be all the more difficult. In the following case studies, the committee describes cases in which commercial-in-confidence has been an issue and considers what lessons can be learnt from them.

Case studies

A few examples will serve to illustrate the problems that will need to be resolved if contracting is not to become a running sore for both parliament and the executive.

Case 1: Geraldine Doogue's contract

In April 1985, members of Estimates Committee C sought information from the ABC about the salary paid to television presenter Geraldine Doogue. The minister representing agreed to convey the request to the Minister for Communications. After consultation between the ABC and the minister, the former provided the committee with the following reply:

We would be reluctant to make public the amount paid to a particular contract employee because such a disclosure could adversely affect the interests of the ABC in acquiring and retaining suitable persons having regard to the competition amongst TV stations for top 'on camera' personalities. However, we would provide such details to the Minister for his information.

Our view is that by providing the Minister with this information, the ABC is demonstrating its preparedness to be accountable, while at the same time protecting its commercial competitiveness. [28]

The committee did not regard this response as adequate and succeeded in having the matter referred to the then Finance and Government Operations (FGO) Committee, which had the power to receive evidence in camera if it wished. In the course of its inquiry, that committee sought an opinion from the Attorney-General's Department which stated, inter alia:

In deciding whether to press for information about commercial contracts, a House or a committee would no doubt balance considerations of commercial confidentiality (including any claims that disclosure would prejudice private or commercial interests) against the public interest in having access to the information (including, for example, the need for that information for the purposes of parliamentary scrutiny of expenditure. [29]

Apart from specifics about the particular ABC contract under consideration, the committee made a number of general observations about parliament's right to know commercially confidential information relating to budget-dependent agencies. It found that 'authorities must be prepared to account to Estimates Committees for all aspects of their financial management and administration, even when the information sought may be regarded as private or commercially confidential' but that parliament should have proper regard for genuine personal and commercial interests. [30]

The FGO Committee concluded that `information cannot and should not be withheld from Parliament or its committees by an authority, unless a specific provision to that effect is contained in an authority's enabling legislation'. The government in its response accepted this general principle but made the point that `Parliament should assess the difficulties associated with making the information public and ensure that any such adverse effect is balanced against the public interest in the Parliament obtaining the information.' [31]

At least part of the FGO Committee's motivation in this inquiry was to gain a public acceptance from the ABC that it was accountable to estimates committees for its expenditure of public monies - and that was achieved. The committee did, however, recognise parliament's own responsibilities in seeking confidential information:

parliamentary committees should ensure that their powers to gain information are not used capriciously. Committees should not be used for `fishing expeditions' but, in order to maintain the integrity of and respect for committees, all committee requests should be based on a genuine need for information. [32]

Case 2: Casselden Place, Melbourne

In 1987 Cabinet approved the construction of 60 000 m2 of office accommodation in Melbourne at an estimated construction cost of $143m excluding fitout, at 1987 prices. The Casselden Place project received the approval of the Public Works Committee. Justifications advanced for the project included the desire to co-locate Commonwealth tenancy holdings, low CBD vacancy rates and an expected rise in property rental costs. Three companies submitted tenders to construct the office building, with the lowest tenderer, Baulderstone Pty Ltd, being successful with a fixed price contract of $186m including $22m for fitout subject to rise and fall. The contract was signed in December 1988; occupancy by tenants commenced in July 1992. Final construction costs were $194.2m, which was regarded by the Audit Office as being within budget, allowing for the rise and fall contract components. [33]

The tenancy arrangements in 1988 envisaged the Australian Taxation Office being the principal tenant with the Department of Administrative Services (DAS) taking up 24 500m2 . By the time of occupancy, DAS had been commercialised and its Commonwealth clients largely untied, resulting in considerable downsizing. The three DAS business units which ultimately occupied the Casselden Place building – Projects/Australian Construction Services, Interiors and Asset Services – took up only 8 611m2 . By this time, the commercial property market had nose-dived, there were significant vacancy rates in the CBD and rapidly declining face rents and effective rents. New tenants in the market were being offered significant incentives by the end of 1992, yet the rates to be charged tenants of Casselden Place were those determined by the Australian Valuation Office (AVO) in July 1991 and, according to a subsequent Audit Office report:

The actual rents per square metre being charged and paid were the market face rates applicable for prime buildings including Casselden Place at December 1992. These rents were at least 40% above effective rents being charged in the market in December 1992 after allowing for the effect of commonly included and well-known incentive packages. [34]

This matter came to the attention of the federal opposition, with Senator Campbell asking, on notice, a series of questions relating to leases for office space in the Casselden Place building. He received a reply from the then Minister of Administrative Services, Frank Walker, offering the senator the opportunity to view the information on a confidential basis. An order of the Senate of 5 May 1994 for the tabling of documents containing information about the rental and outgoings of leases between the agencies concerned was not complied with. Accordingly Senator Campbell moved a successful censure motion against the minister and the minister representing him in the Senate, Senator Bob McMullan. [35] The matter did not rest there, with the opposition parties joining together in the Senate on 22 June 1994 to pass a resolution ordering the Auditor-General to report on fourteen specific matters relating to tenancy arrangements in the Casselden Place building and ordering the Senate Committee of Privileges to consider the refusal of the minister to produce documents in response to an order of the Senate. Both orders were complied with, with the Auditor-General presenting his report in October 1994 and the Senate Committee of Privileges reporting in March 1995. The latter commended the use of an independent arbiter – in this case the Auditor-General – to overcome the difficulties presented by executive claims of executive privilege or public interest immunity. [36]

The salient questions raised by the above case are:

• was the information the government ministers sought to protect really commercially confidential?
• was the offer of a confidential viewing of the material an appropriate or an adequate response?
• was the use of an independent arbiter an appropriate way to handle the situation on that occasion and perhaps more generally?
• were there extenuating circumstances in this case which make the lessons learnt from it inapplicable more broadly?

The three DAS agencies whose rentals were the subject of the commercial confidentiality claim had, in the period immediately prior to the move to Casselden Place, become self-funding commercial business units and in the case of two of them, had had their Commonwealth customers untied and hence were competing in an open marketplace, albeit with greater obligations of disclosure and accountability by virtue of their being public sector enterprises. The government was concerned on the one hand to ensure competitive neutrality, with DAS businesses being seen to compete without any special advantages because of their status as government agencies; but on the other hand, it wanted those businesses to compete successfully. Hence the stated concern to do nothing which might disclose to their competitors (via disclosure to parliament) their cost structures, such as rental obligations.

The government sought to justify its non-provision of the lease information on the grounds that it was protecting the interests of the Commonwealth employees in the DAS agencies by attempting to ensure that their businesses remained competitive. In the censure debate, however, it was argued that rent was only a minor cost of between 10 and 15 per cent of the outgoings of a business and precise knowledge by a competitor of the exact level would only marginally affect tender prices. [37] It was also suggested that details of the leases would be publicly available from the state titles office, [38] though this might not be the case in Victoria where the committee understands that the registering of leases is optional. The committee notes that the Auditor-General's report provided on the public record all the details sought bar one, suggesting that the commercial confidentiality claims were perhaps overstated. Curiously, the one figure blacked out in the report was the amount of cash settlement provided to one of the agencies to settle restoration obligations. [39] It seems to the committee that this is more likely to have been the result of sensitivities among the DAS agencies, rather than a matter which might be genuinely commercially confidential.

The then government repeatedly offered to provide on a confidential basis the lease information requested. As Senator McMullan stated in the censure debate:

The obligation of the executive, when it is in conflict with the legislature about the provision of information … is to seek to make as much of the information as possible available in an alternative way. We are not in the business of covering up. [40]

Senator Campbell replied as follows:

One of the offers we have had in relation to this is for me to go and have a confidential look at some documents again. The problem with that is that if I take up the offer, have a confidential look and am not satisfied with what I see, what do I do? If I come back here and say, `I have just discovered some major fraud,' or `I have just discovered a major maladministration,' Senator McMullan would put out press releases saying, `Senator Campbell has rorted the truth again.' I would be putting myself in an invidious position … having confidential briefings in the minister's office is not the way to solve it. [41]

As noted above, the way out of the impasse on this occasion was the use of an independent arbiter in the form of the Auditor-General, an approach suggested by the Senate Committee of Privileges in its 49th report.

Case 3: Centenary House

Prior to 1989 the Australian National Audit Office (ANAO) was accommodated in the Silverton Building in Civic, Canberra. That building was evacuated due to structural faults and temporary office accommodation for the ANAO was found in Medibank House, Woden. The then Joint Committee of Public Accounts (JCPA) recommended that the ANAO needed to be accommodated within or near the parliamentary triangle [42] and discussions began between the ANAO and the Australian Property Group (APG) in March 1990. In October of that year the ANAO wrote to the Secretary of DAS, formally advising of his requirement for 7500m2 office accommodation in a separate building in the Parkes-Barton area or in a large complex with controlled access. The APG advised the ANAO of options, including one of a building to be constructed in the area by Lend Lease and in December 1990 the ANAO indicated its preference for the Lend Lease proposal. It was not, at this stage, advised that the proposal was a joint venture with the Australian Labor Party (ALP). Lease negotiations and discussions with the Department of Finance took place in 1991 and until 8 April 1992, when the formal agreement to the lease was signed by the Australian Government Solicitor. The terms of the lease, as negotiated by officers of the APG with the benefit of valuation advice from the Australian Valuation Office, were as follows:

• area of 6000m2
• 15 years, with an option of a further 5 years;
• rental $280 per square metre per annum;
• escalator adjustment of 10.5% p.a. from 1 January 1991 to date of practical completion;
• escalator adjustment of 9% p.a. from date of practical completion for 15 years;
• market review at the end of the sixth and tenth years and the agreed rate to be whichever is the greater between the escalated rent rate and the market rate; and,
• total refurbishment after 10 years if option to extend the lease exercised.

Details of the chronology of events and of comparable leases were sought throught much of 1993 and early 1994 through estimates and in the chambers, and frequently attracted responses failing to provide the relevant details and citing commercial confidentiality as the reason. [43] Two inquiries were agreed to: a joint inquiry by the Auditor-General and the South Australian Auditor-General; and an independent inquiry by the independent auditor of the Auditor-General, Mr Boymal, with a right to report directly to parliament. In the event, however, a judicial inquiry into all aspects of the leasing arrangements was established in May 1994, conducted by the Hon. T.R. Morling, QC. His report in October of that year concluded that, while the length of the lease was unusual, the escalator adjustment and the rent review clause were justifiable at the time and that, overall, `the terms of the lease are reasonable, are not unduly favourable to the lessor and are not inimical to the interests of the Commonwealth'. [44]

The government consistently argued that to provide lease terms, effective value of incentives, addresses, lettable areas, building outgoings et cetera would breach the confidentiality of the APG customers and adversely affect the prospects of the APG as a commercial service provider in competition with the private sector. [45] Yet the Morling report, with just such detail, was made public.

Consequences of non-disclosure

If a minister refuses to table a document when requested to do so, either House has the power to order him or her to do so. In the event that the minister refuses to comply with the order, the House may censure the minister or the government. The usual result of a successful censure motion is temporary embarrassment but in a few cases, the exposure has prompted further action such as a committee or Auditor-General inquiry, or the threat of one. [46] Were the case sufficiently serious, the Senate might carry through with a motion allowing penalties to be imposed on a minister, such as preventing him or her from introducing bills. [47]

Possible ways forward

Codification of what constitutes `commercially confidential' information

In a supplementary submission to the committee, the Australian Law Reform Commission produced a broad outline of information which could be protected on the grounds of its commercial character in the contracting out of government services:

• information that has an intellectual property value, or amounts to a trade secret (noting that this may change over time);
• information that relates directly to the actual conduct and operations of the contractor (noting also that this may change over time) – in the case of the Victorian Metropolitan Ambulance Service, this included prospective tenderers' financial position, operating hours, activity profile, vehicle insurance, communications equipment, employee shift configurations, cost structures, staff training programs and customer service initiatives; and the tender evaluation methodology;
• details concerning the contractor's successful tender, where evidence of the market in that particular industry demonstrates that disclosure of specified information will adversely impact the business affairs of the contracting firm;
• information obtained in confidence that satisfies the common law test for breach of confidence; and
• circumstances where there is no overriding public interest in disclosure of the information or where the public interest is not so great as to result in the person or business being unreasonably affected by disclosure of the information. [48]

While there is a broad general understanding of the kinds of information which contractors might regard as commercially confidential and having the potential, if disclosed, to disadvantage them vis-a-vis their competitors, the committee accepts that precise codification might not be workable across different industries or services and at different times. Far less consensus is likely regarding what information concerning contractual arrangements should be available to parliament to ensure adequate levels of accountability.

Even in the event that an agreed list of commercially confidential matters were drawn up, adherence to it would be another question entirely. A refusal by a government to produce information demanded by a parliament is a political matter and one whose outcome is determined by the processes of parliament described above.

If it is accepted that information which might disadvantage contractors vis-a-vis their competitors is not to be openly published, there might be a case, as suggested by the Department of Health and Family Services, for including in contracts clauses specifying categories of information which may be disclosed publicly.

Non-disclosure agreements

One compromise approach to handling commercial confidentiality matters has been the offer of the information on the condition that committee members and committee staff sign non-disclosure agreements. It is doubtful if such agreements could be deemed to be legally binding, if an individual chose to disclose information for the purposes of parliamentary work.

A South Australian parliamentary committee was one which experienced – and rejected - the offer of information dependent upon the signing of non-disclosure agreements. The then Select Committee on Contracting Out of State Government Information Technology obtained the support of the South Australian Legislative Council which endorsed the committee's call for the provision of the EDS contract on an in camera basis but this was ignored.

The parliamentary furore over Geraldine Doogue's contract, as described above, was exacerbated by the inclusion in the contract of a non-disclosure clause, binding on both parties to the contract. In its submission to the committee, the Attorney-General's Department raised the use of agreements to settle contract disputes on terms which are not to be disclosed. [49] Given that parliament should have the right to know how public monies are being spent, the committee cautions strongly against the use of non-disclosure agreements.

An independent arbiter

The use of an independent arbiter to break deadlocks between government and parliament has been shown to be an effective mechanism, as in the Casselden Place matter described above, when the Auditor-General performed such a role. As an independent officer of the parliament, the Auditor-General is ideally suited to be a circuit-breaker in such circumstances and brings to the position a wealth of experience in matters of commercial confidentiality.

The Auditor-General is limited, however, in his powers to investigate ministerial actions. His role also requires access to records, as considered in chapter 4. For his office to be in a position to investigate commercial-in-confidence cases in detail, such access to records must be provided for.

Production of contract summaries

The South Australian government attempted to resolve the problems associated with the release of commercially confidential information in 1996. All-party discussions resulted in an agreement on the establishment of a protocol, which provided that:

• parliamentary committees would have access to summaries of contracts;
• summaries would exclude commercially confidential matters;
• summaries would be prepared without delay; and
• the Auditor-General would certify that the summaries were correct and that the matters claimed to be commercially sensitive were so.

The relevant audit legislation was amended to enable the Auditor-General to carry out his new function. Summaries are to be produced by the Crown Solicitor's Office, subject to instruction from the relevant agency and comment from the contracted party.

Only one summary has been tabled to date, on the contract for the operation of Modbury Hospital. [50] It was less than two pages in length and amounted to little more than the contract's table of contents. Unsurprisingly, it was not well received.

This committee understands, however, that a South Australian select committee on Mount Gambier prison was furnished with volumes of reports and contracts which, the committee was assured, contained a plain English version of the contract for the operation of the prison; the contract itself was not provided, but nor did it become an issue.

Release after a certain time

If it is accepted that elements of contracts need to remain confidential to prevent competitors from being unfairly advantaged, it then needs to be questioned whether such confidentiality pertains indefinitely. It has been argued that the need for confidentiality would expire long before the 30 year-period accorded to cabinet and national security documents.

Reversal of the onus of proof

In determining whether a claim for commercial confidentiality is justified, both the ANAO and the Commonwealth Ombudsman suggested the reverse onus of proof test. The former cited the experience of the New Zealand courts which have enforced the primacy of the public interest test regarding contract specifications and performance and, `to override the public interest grounds of disclosure, there has to be a very strong argument of commercial prejudice'. [51] Mr Greenslade, representing the ANAO, stated:

In our view, the question of whether or not commercial-in-confidence information should be disclosed to the parliament should start from the general principle that the information should be made public unless there is a good reason for it not to be. In other words, what we are saying is there should be a reversal of the principle of onus of proof which would require that the party arguing for non-disclosure should substantiate that disclosure would be harmful to its commercial interests and to the public interest. [52]

The committee agrees. In practice, however, the Commonwealth parliamentary forum in which the majority of claims of commercial confidentiality is made is estimates hearings, the partisan nature of which is hardly conducive to a calm, reasoned debate on such an issue. The committee believes, however, that where information is withheld on commercial confidentiality grounds, at the very least the reasoning behind the decision should be provided promptly to the committee. If in turn the committee finds that reasoning inadequate, it may seek to refer the matter to an independent arbiter.

Conclusions

The committee is firmly of the view that only relatively small parts of contractual arrangements will be genuinely commercially confidential and the onus should be on the person claiming confidentiality to argue the case for it. A great deal of heat could be taken out of the issue if agencies entering into contracts adopted the practice of making contracts available with any genuinely sensitive parts blacked out. The committee accepts that some matters are legitimately commercially confidential. If parliament insists on a `right to know' such legitimately commercially confidential matters, the most appropriate course to achieve this would be the appointment of an independent arbiter such as the Auditor-General to look on its behalf and, as a corollary, to ensure that he has the staff and resources to do it properly.

Senator Shayne Murphy

Chairman

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Footnotes

[1] Mr Tony Harris, Evidence, 20 May 1997, p. 378.

[2] Senate Hansard, 30 November 1989.

[3] Senate Hansard, 30 November 1989.

[4] Australian Law Reform Commission & Administrative Review Council, Open Government: a review of the federal Freedom of Information Act 1982, AGPS, Canberra, 1995, p. 141.

[5] Evidence, 5 September 1997, pp. 693-4.

[6] Evidence, 20 May 1997, p. 378.

[7] Senate Standing Orders, Canberra, 1997.

[8] Senate Hansard, 4 February 1997, p. 55.

[9] Senate Hansard, 27 March 1995, p. 2209.

[10] Senate Hansard, 9 June 1995, p. 1260.

[11] Senate Standing Orders, Canberra, 1997, SO 25 (15).

[12] Senate Standing Orders, Canberra, 1997, SO 26 (2).

[13] Journals of the Senate, 25 February 1988.

[14] Senate Foreign Affairs, Defence and Trade Legislation Committee, Hansard, 27 February 1997, p. 108.

[15] Senate Environment, Recreation, Communication and the Arts Legislation Committee, Hansard, 12 June 1997, p. 321.

[16] Senate Economics Legislation Committee, Hansard, 18 August 1997, p. 129.

[17] Senate Environment, Recreation, Communication and the Arts Legislation Committee, Hansard, 21 August 1997, p. 127.

[18] Senate Finance and Public Administration Legislation Committee, Hansard, 12 June 1997, p. 363.

[19] Senate Foreign Affairs, Defence and Trade Legislation Committee, Hansard, 17 June 1997, p. 437.

[20] ibid., p. 440.

[21] Senate Rural and Regional Affairs and Transport Legislation Committee, Hansard, 26 February 1998, p.  29.

[22] ibid., p. 98.

[23] That committee's report, Inquiry into Matters pertaining to the Marketing of the Disability Reform Package, was tabled in December 1994.

[24] Submissions, vol. 1, p. 11.

[25] Odgers' Australian Senate Practice, 7th ed., Canberra, AGPS, 1995, p. 497.

[26] Senate Privileges Committee, Committee of Privileges 1966-1996, 62nd Report, Canberra, 1996, p. 22.

[27] Senate Standing Orders, February 1997, 37 (3).

[28] Senate Standing Committee on Finance and Government Operations, ABC Employment Contracts and their Confidentiality, 1996, p. 2.

[29] ibid., p. 28.

[30] ibid., pp. 50-51.

[31] Senate Hansard, 17 November 1987, p. 1840.

[32] Senate Finance and Government Operations Committee, ABC employment contracts and their confidentiality, 1986, p. 46.

[33] Auditor-General, Special Investigation into Casselden Place Building, Melbourne, Audit Report no. 4, 1994-95, AGPS, Canberra, 1994, pp. 3-7.

[34] ibid., p. 14.

[35] See Senate Hansard, 10 May 1994, pp. 508-16 for the debate.

[36] Senate Committee of Privileges, Parliamentary Privileges Amendment (Enforcement of Lawful Orders) Bill 1994 – Casselden Place Reference, 52nd Report, 1995, pp. 4-5.

[37] Senate Hansard, 10 May 1994, p. 514.

[38] Senate Hansard, 3 February 1994, p. 310.

[39] Auditor-General, Special Investigation into Casselden Place Building, Melbourne, Audit Report no. 4, 1994-95, AGPS, Canberra, 1994, p. 26.

[40] Senate Hansard, 10 May 1994, p. 511.

[41] Senate Hansard, 10 May 1994, p. 508.

[42] Joint Committee of Public Accounts, The Auditor-General: Ally of the People and Parliament, (Report no. 296) 1989.

[43] See, for example, Senate Hansard, 2 February 1998, p. 291.

[44] Royal Commission of Inquiry into the Leasing by the Commonwealth of Accommodation in Centenary House, Report of the Commissioner, AGPS, Canberra, 1994, p. 64.

[45] Senate Hansard, 2 February 1998, p. 291.

[46] ibid.

[47] See, for example, Journals of the Senate, 9 June 1994, p. 1791.

[48] Australian Law Reform Commission, in Submissions, vol. 3, pp. 518-20.

[49] Submissions, vol. 2, p. 351.

[50] The Report on Summary of Confidential Government Contract Under Section 41A of the Public Finance and Audit Act 1987 – Modbury Hospital was tabled in the Legislative Council on 4 July 1997.

[51] Evidence, 4 July 1997, p. 576.

[52] ibid., p. 588.