LinkWater and LinkWater Projects
Our Ref: PMcM:DS
16 January 2009
Ms Webbe and Professor Weller
Independent Review of Government Boards
Committees and Statutory Authorities
PO Box 15185
City East QLD 4002
Dear Ms Webbe and Professor Weller
A PUBLIC INTEREST MAP FOR GOVERNMENT BODIES
Thank you for your invitation to provide this submission in response to your recent review 'A Public Interest Map - An Independent Review of Queensland Government Boards, Committees and Statutory Authorities'.
I am pleased to provide this submission of behalf of the Queensland Bulk Water Transport Authority (trading as LinkWater) and the Southern Regional Water Pipeline Company Pty. Ltd. (trading as LinkWater Projects). Both LinkWater and LinkWater Projects are included in the 458 Government bodies identified in Appendix B of A Public Interest Map for Government Bodies and are subject to your review.
LinkWater is one of the new State water entities, recently created as statutory authorities. LinkWater was proclaimed on 2 May 2008 as a separate legal entity, and began operations on 1 July 2008 within the South East Queensland (SEQ) Water Grid market. LinkWater is responsible for the bulk transportation of water within the Water Grid and is contracted directly to the SEQ Water Grid Manager.
LinkWater Projects is a Special Purpose Vehicle (SPV) of the Department of Infrastructure and Planning (DIP) created in 2006 for the purpose of constructing and operating water pipelines associated with the development of the SEQ Water Grid. LinkWater Projects operates under the provisions of the Corporations Act 2001.
LinkWater Projects, while a separate business entity, shares a common Board and has access to the management structure and business systems of LinkWater through a simple management agreement. In this way the SPV can gain the benefits of the Corporations Act 2001 for construction of major state water assets and yet still be integrally bound to the future operator of those assets (LinkWater).
The independent review has been discussed in some detail with new State water entities and there is a significant degree of consensus on most issues. Both LinkWater and LinkWater Projects are generally supportive of the findings and recommendations outlined within your independent review.
For brevity, we have taken the opportunity to make selective comments to either clarify agreement on key aspects or identify different points of view. Where appropriate, diverse comments specific to either organisation are highlighted.
We concur with the general recommendation of a holistic good governance framework embodied through a generic Government Bodies Act and supported by a policy framework, will provide an established set of guidelines and policies for non-Government bodies to apply. This approach is welcomed.
This recommendation has many similarities with the Corporations Act that applies to publically listed companies and in part to LinkWater Projects. Our recent experience with LinkWater Projects has shown that this approach has many advantages, particularly with an entity specifically created to deliver discrete outcomes LinkWater, as a newly formed State water entity, is already subject to such a framework - the State Water Entities Governance Framework, published recently by Queensland Treasury. This framework is based on that applied to Government Owned Corporations (GOC) and was implemented in late 2008.
LinkWater Projects, as a principally construction oriented vehicle, is probably subject to a more commercial governance arrangement under the Corporations Act 2001 but could benefit from some of the outcomes expected from the proposed new Government Bodies Act.
In the case of the current arrangements for the efficient management of LinkWater and LinkWater Projects, the outcomes being contemplated could make the management of both organisations more efficient and effective.
We do not see the need, however, to duplicate the existing governance framework for LinkWater Projects or applying an additional set of legislative requirements to the recently formed statutory authorities such as LinkWater. Further, it would be seen to be advantageous to restructure all current (and often disparate) legislative obligations (in different Acts, frameworks and policies), into the one new Government Bodies Act that is contemplated by the review.
Non-departmental Government body
LinkWater is supportive of the recommendation for the preparation of a public interest business case for the creation (or continuation) of a non-departmental Government body. The process proposed appears to be a reasonable methodology for addressing the various issues associated with improving the relevance, efficiency and effectiveness of the roles and functions currently being performed by government bodies.
The four threshold criteria suggested (any one of which being necessary to override the nominated premise of a departmental organisational form), appear reasonable. However, after discussion with other similar entities, we believe that at least one additional criterion of commerciality should be added to the threshold criteria set.
As is the case with LinkWater, a State Government non-departmental body may be required to act in a commercial manner. Where this is the case, these bodies are often appropriately structured to act commercially, strive to produce a profit (surplus), and if required can return a dividend to the Government.
Further, it is important for commercial government organisations to operate as close to the private sector as possible, and be governed by an independent non-executive board with the skills and attributes to govern the organisation. This is particularly true of the new water entities recently created in South East Queensland.
Given the relationship between the State Owned water entities (including LinkWater) and the local government controlled Distribution and Retail Authorities, commercial outcomes at each entity interface are essential for public efficiency and effectiveness.
The reviewers should consider the wider commerciality and independence of the organisation and include both as part of the public interest case.
Independence (Conflict of Interest)
The review also suggests that regulatory or independent statutory functions should not necessarily reside outside a department. It is strongly suggested that there are positive opportunities for government to have one or both outside a department. The nominated independence threshold criteria outlined in public interest case is generally supported.
As with the management of the Southeast Queensland Water Grid, however, it is often quite important, particularly from a public point of view, that regulatory or independent statutory functions are separated from direct government control.
If it is necessary for government to both undertake operational activities as well as a regulatory role, a conflict of interest may exist if these roles are both delivered in, and overseen by, the same departmental structure. This is clearly evidenced by the current activities of LinkWater Projects in the effective construction of Water Grid assets.
With the Water Grid model, roles are clearly separated to avoid such conflicts. The Water Grid Manager appears to have both regulatory and operational roles while the other Grid entities are generally operational. LinkWater believes that possibly even greater separation could be beneficial to avoid duplication between the Water Grid Manager and the operational elements of the Grid.
LinkWater believes that this conflict of interest matter should be examined more closely, and the reviewers assess where non-departmental bodies may undertake functions due to the independent nature of their responsibilities. The review appears to handle this issue in a minimalist way and should be expanded cover matters of independence and conflict of interest.
Other Relevant Issues
While not necessarily a key threshold issue, a separate matter for the public interest case to consider is customer service. This is a key driver for regulated service entities such as those recently formed in the Southeast Queensland Water Grid.
LinkWater would like the public interest case to also identify and assess the many customer service improvement benefits that could be accessed by a non-department body form. There appears to be a significant body of evidence suggesting that a departmental body form would not achieve the levels of customer service necessary to achieve the efficiency and effectiveness expectations of the community.
Thank you once again for the opportunity to make a submission on behalf of the Boards of LinkWater and LinkWater Projects to this important public interest matter. I look forward to the results of Part B of your review expected in March 2009 and the opportunity to further comment at that time.
Chief Executive Officer