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13 Department of Immigration and Citizenship Service Fee Forecast and Comparison for Wickham Point Immigration Detention Centre March 2011

14 1. Introduction The Department of Immigration and Citizenship (the Department) has a plan for a new immigration detention centre (the Centre) at Wickham Point in Darwin. The Centre will be privately leased and is expected to accommodate 1,500 beds at its full capacity. The Department currently has existing contractual arrangements with Serco (Australia) Pty Ltd (Serco) for the provision of a range of services for the immigration detention centres around Australia. The services include: People in Detention Services Facilities Management and Support Services Business Services Security Services Transport and Escort Service. The contract also provides for the pass through/mark-up of certain identified costs The Department has received an offer from the Centre s prospective lessor (Foxy) to provide some of the services currently managed by Serco for the other detention facilities. The services offered by Foxy comprise the majority (but not all) of the services specified under the Schedule of the DIAC Contract with Serco for the provision of Facilities Management and Support Services as well as a number of services provided under the Pass Through/Mark-up Costs arrangements. PricewaterhouseCoopers (PwC) has been requested to undertake a comparative analysis of pricing offered by Foxy against comparable services offered by Serco at other Immigration Detention Centres to assist the Department in determining whether the offer represents value for money. 2. Executive summary s 47C(1) Our assessment of the fees for maintenance services provided by Serco at Northern IDC and Curtin IDC suggests that the comparable services have been provided at between per head per day. The estimated fees for the comparable services per annum based on these rates are between. Foxy s quote is fixed at per head per day or per annum at the Centre s full capacity. There are a number of external factors which significantly limit the conclusions that can be drawn from this comparative analysis. 2 February 2011

15 3. Purpose This paper has been prepared to assist the Department in making a decision as to whether the offer by Foxy for the provision of maintenance services at Wickham Point IDC represents value for money. This paper is not intended for general circulation or distribution, nor is it to be reproduced or used for any purpose other than as outlined above, without our written consent in each specific instance. We do not assume any responsibility for liability for any losses suffered as a result of the circulation, publication, reproduction or other use of this paper contrary to the provisions of this paragraph. We reserve the right to review and amend all opinion included or referred to in this paper and, if we consider it necessary, to revise such in the light of any information which becomes known to us after the date of the paper or if additional sources of information, not referred to Sources of information contained in the paper, are provided to us. We have not verified any of the information presented to us nor done anything in the nature of an audit of the information given to us. Consequently, we express no opinion on the reliability or completeness of the information supplied to us and upon which our paper is based. 4. Our approach We have taken the following steps to undertake this analysis:- Reviewed the offer by Foxy for the provision of maintenance services at Wickham Point IDC; Reviewed the scope of work and associated pricing tables set out in schedule 5 of the Detention Services Contract between DIAC and Serco for the provision of services at Northern IDC; Reviewed the scope of work and associated pricing tables proposed by Serco for provision of services at Curtin IDC; Reviewed the actual fees rendered for NIDC and CIDC from July 2010 to February 2011 including fixed, variable and pass through/mark-up costs under each service requirement Undertook a comparison of the maintenance services offered by Foxy against those set out under Schedule of the Detention Services Contract between DIAC and Serco to identify the comparable range of services delivered at those sites; Identified the cost of delivering the comparable range of services at full capacity at Curtin IDC (1,200 People in Detention) and Northern IDC (546 People in Detention); Extrapolated, on a pro-rata basis, the cost of delivering comparable services at Curtin IDC and Northern IDC to estimate an indicative cost of delivering the comparable services at Wickham Point IDC at full capacity (1,500 People in Detention) Compared the indicative cost of delivering comparable services at Wickham Point IDC at full capacity against the offered cost by Foxy. 3 February 2011

16 The following factors need to be taken into account in conjunction with the calculations provided in this paper. The cost forecasts under the Serco arrangement have been calculated based on a simple pro rata basis, as no other alternative mechanism appears to exist to predict the future variables and pass through/mark-up costs that are unique for the Centre. The variables and the pass through/mark-up costs fluctuate significantly. Accordingly the pro rata based estimates may not represent the actual service fees under such categories. All dollar figures in the paper are inclusive of GST unless otherwise specified. 5. Limitation We note that there are a range of factors which impact significantly on the conclusions that can be drawn from the comparative analysis of the Foxy offer against the cost of delivering comparable services under the existing Serco contract: The fee for the provision of facilities management services at existing sites under the Detention Services Contract between DIAC and Serco is part of a holistic fee for the provision of a range of costs. Whilst the pricing tables at Schedule 5 allocate a portion of these costs for the delivery of maintenance services, these are not necessarily indicative of the actual costs to Serco in delivering maintenance services as a stand alone service; The Detention Services Contract between DIAC and Serco is very complex, particularly in terms of the statement of works, the volume of requirements and the standard of services required. Whilst the Foxy offer comprises a range of similar services, it is not clear to what extent this will involve performance of the detailed requirements and service standards as are included in the Detention Services Contract. Definition of the exact scope of services and performance standards is likely to impact significantly on the cost of delivering the services. Serco s costing mechanism and the fees schedules contained in the contracts are not necessarily indicative of the actual service fees that are going to be charged to the Department. The actual service fees are heavily driven by the variables and the pass through costs that undermine the certainty of the actual service fees. Unique circumstances exist at each of the various sites for which appropriate assumptions may be required. For example, service delivery at Curtin IDC is based on a remote model with labour costs based on a casual workforce operating on a fly-in, fly-out basis which impacts significantly on the overall cost of delivering services at this site. The impacts of such assumptions are not easily quantifiable and are not reflected in the comparative assessment that has been undertaken. The pricing model for delivery of maintenance services at NIDC was developed as part of a holistic model for delivery of services across the entire Detention Services Network. Accordingly there are limitations in the conclusions that can be drawn regarding the cost of delivering maintenance services at NIDC as a stand alone facility. Foxy s quote is fixed on a per head basis and does not include a detailed breakdown of individual cost items or underlying assumptions. Due to limited degree of information, it is impractical to compare Foxy s quote directly to the Serco s costs for other facilities. 4 February 2011

17 The pricing model for delivery of services by Serco at CIDC has been proposed by Serco but is yet to be accepted by the Department. The service fee has been paid in accordance with this model as an interim arrangement whilst contract variation negotiations progress, however the pricing proposal is yet to be formally accepted by DIAC or assessed as representing value for money. 6. Sources of information Monthly tax invoices from July 2010 to February 2011 for the Northern Immigration Detention Centre. Monthly tax invoices from July 2010 to February 2011 for the Curtin Immigration Detention Centre. s 22(1)(a)(ii) s 22(1)(a)(ii) from to dated 24 February Serco Detention Services Contract Immigration Detention Centres Volume Foxy offer Foxy s quote is per head per day or per annum at the full capacity (1,500 persons) and includes the following services:- Management of assets; Maintenance of assets; Catering food and labour (including over-time); Cleaning all areas including clients; Linen service; Rubbish removal; Water and sewerage; Electricity and gas; Telecommunication (installation only, usage still to be met by the Department); Staff transport; Insurance; Environmental management; and Occupational Health and Safety (OH&S). It does NOT include:- 5 February 2011

18 Malicious damage; or Security or emergency management The following table outlines the service lines provided by Serco for other detention centres and the comparable services offered by Foxy. Foxy offer appears to include the items marked with. The marked items have been selected by description and may not necessarily comparable to the services that are contained the contract with Serco. In particular, it is unclear whether the offer by Foxy includes a commitment to provide the required services in accordance with the detailed requirements and service standards as prescribed under the Detention Services Contract between DIAC and Serco. Services People in Detention Services Well-Being of People in Detention Reception, Transfer, Accommodation and Discharge of People in Detention Individual Management Property of People in Detention Facility Management and Support Management of Assets Maintenance of Assets Centre Security and Emergency System Catering Cleaning Services (Admin only) Environment Management Occupational Health and Safety (OH&S) Management of Emergencies Business Services Business Services Plan Human Resource Management Alternative Detention Contract and Relationship Management Records Management Information Technology Requirements Incident Management Business Continuity Reporting of Service Delivery Quality Management and Continuous Improvement Stores Security Services Delivery of Security Services Entry Control Centre Security Transport and Escort Services Transport Escort Included 6 February 2011

19 Pass Through/Mark-up Costs Scheduled Maintenance Ground and Infrastructure Maintenance Alternative Detention Disbursements (Linen, Cleaning, etc.) Utilities Capital Works Loose Asset Purchases Additional Storage 8. History of Serco s service fees - NIDC The service fees charged for NIDC from July 2010 to February 2011 are outlined below. The items are the service requirements Foxy has proposed to provide which are relevant for the comparison further discussed below. Services Comparison Fixed Variable PTC Total People in Detention Services Well-Being of People in Detention Reception, Transfer, Accommodation Individual Management Property of People in Detention Facility Management and Support Management of Assets Maintenance of Assets Centre Security and Emergency Sys Catering Cleaning Services (Admin only) Environment Management Occupational Health and Safety Management of Emergencies Business Services Business Services Plan Human Resource Management Alternative Detention Contract and Relationship Mgt Records Management Information Technology Requirement Incident Management Business Continuity Reporting of Service Delivery Quality Mgt and Continuous Imp 7 February 2011

20 Services Comparison Fixed Variable PTC Total Stores Security Services Delivery of Security Services Entry Control Centre Security Transport and Escort Services Transport Escort Pass Through/Mark-up Costs Scheduled Maintenance Ground and Infrastructure Alternative Detention Disbursements (Linen, Cleaning, etc.) Utilities Capital Works Loose Asset Purchases Additional Storage Total Total Not GRAND TOTAL 9. History of Serco s service fees - CIDC The service fees charged for CIDC from July 2010 to February 2011 are also outlined below. Services Comparison Fixed Variable PTC Total People in Detention Services Well-Being of People in Detention Reception, Transfer, Accommodation Individual Management Property of People in Detention Facility Management and Support Management of Assets Maintenance of Assets Centre Security and Emergency Sys Catering Cleaning Services (Admin only) Environment Management Occupational Health and Safety 8 February 2011

21 Services Comparison Fixed Variable PTC Total Management of Emergencies Business Services Business Services Plan Human Resource Management Alternative Detention Contract and Relationship Mgt Records Management Information Technology Requirement Incident Management Business Continuity Reporting of Service Delivery Quality Mgt and Continuous Imp Stores Security Services Delivery of Security Services Entry Control Centre Security Transport and Escort Services Transport Escort Pass Through/Mark-up Costs Scheduled Maintenance Ground and Infrastructure Alternative Detention Disbursements (Linen, Cleaning, etc.) Utilities Capital Works Loose Asset Purchases Additional Storage Total Total Not GRAND TOTAL 10. Cost forecast based on service history NIDC can accommodate 546 persons at it full capacity. Where NIDC was run at its fully capacity, the average rate per head per day charged for the period from July 2010 to February 2011 and the estimated fee per annum for the services are outlined per below. 9 February 2011

22 CIDC can accommodate 1,200 persons at it full capacity. Where CIDC was run at its fully capacity, the average rate per head per day charged for the period from July 2010 to February 2011 and the estimated fee per annum for the services are outlined per below. 11. Comparison The table below provides a comparison, based on the Foxy s fixed quote and the estimates from s 47C(1) the Serco s fee history outlined above. 12. Additional information required As outlined above under Limitation, there are significant limitations in the conclusions that can be drawn from a comparative assessment of the Foxy offer against the cost of delivering similar services by Serco at other Immigration Detention Centres. i In order to facilitate a more comprehensive assessment of value for money, DIAC may wish to consider one or more of the following options: Obtain from Foxy a detailed breakdown of individual cost items and underlying assumptions. This would allow an assessment of the reasonableness of assumptions 10 February 2011

23 proposed by Foxy in the development of its pricing proposal and also how this compares to what Serco is required to fulfil under its existing arrangements. Request Serco to provide an offer for the provision of maintenance services as part of its broader delivery of services at Wickham Point IDC so as to allow for a more directly comparable assessment of the offer between the two potential providers. Request the provision of an offer for the delivery of maintenance services at Wickham Point IDC from other potential providers through an open market or direct tender process so as to allow for a comprehensive assessment of the market value of the requested services 11 February 2011

24 Department of Immigration and Citizenship Service Fee Forecast and Comparison for Wickham Point Immigration Detention Centre May 2011

25 1. Introduction The Department of Immigration and Citizenship (the Department) has a plan for a new immigration detention centre (the Centre) at Wickham Point in Darwin. The Centre will be privately leased and is expected to accommodate 1,500 beds at its full capacity. The Department currently has existing contractual arrangements with Serco (Australia) Pty Ltd (Serco) for the provision of a range of services for the immigration detention centres around Australia. The services include: People in Detention Services Facilities Management and Support Services Business Services Security Services Transport and Escort Service. The contract also provides for the pass through/mark-up of certain identified costs The Department has received an offer from the Centre s prospective lessor (Foxy) to provide some of the services currently managed by Serco for the other detention facilities. The services offered by Foxy comprise the majority (but not all) of the services specified under the Schedule of the DIAC Contract with Serco for the provision of Facilities Management and Support Services as well as a number of services provided under the Pass Through/Mark-up Costs arrangements. PricewaterhouseCoopers (PwC) has been requested to undertake a comparative analysis of pricing offered by Foxy against comparable services offered by Serco at other Immigration Detention Centres to assist the Department in determining whether the offer represents value for money. 2. Executive summary s 47C(1) Our assessment of the fees for maintenance services provided by Serco at Northern IDC and Curtin IDC suggests that the comparable services have been provided at between per head per day. The estimated fees for the comparable services per annum based on these rates are between Foxy s quote is fixed at per head per day or per annum at the Centre s full capacity. 2 May 2011

26 3. Purpose This paper has been prepared to assist the Department in making a decision as to whether the offer by Foxy for the provision of maintenance services at Wickham Point IDC represents value for money. This paper is not intended for general circulation or distribution, nor is it to be reproduced or used for any purpose other than as outlined above, without our written consent in each specific instance. We do not assume any responsibility for liability for any losses suffered as a result of the circulation, publication, reproduction or other use of this paper contrary to the provisions of this paragraph. We reserve the right to review and amend all opinion included or referred to in this paper and, if we consider it necessary, to revise such in the light of any information which becomes known to us after the date of the paper or if additional sources of information, not referred to Sources of information contained in the paper, are provided to us. We have not verified any of the information presented to us nor done anything in the nature of an audit of the information given to us. Consequently, we express no opinion on the reliability or completeness of the information supplied to us and upon which our paper is based. 4. Our approach We have taken the following steps to undertake this analysis:- Reviewed the offer by Foxy for the provision of maintenance services at Wickham Point IDC; Reviewed the scope of work and associated pricing tables set out in schedule 5 of the Detention Services Contract between DIAC and Serco for the provision of services at Northern IDC; Reviewed the scope of work and associated pricing tables proposed by Serco for provision of services at Curtin IDC; Reviewed the actual fees rendered for NIDC and CIDC from July 2010 to February 2011 including fixed, variable and pass through/mark-up costs under each service requirement Undertook a comparison of the maintenance services offered by Foxy against those set out under Schedule of the Detention Services Contract between DIAC and Serco to identify the comparable range of services delivered at those sites; Identified the cost of delivering the comparable range of services at full capacity at Curtin IDC (1,200 People in Detention) and Northern IDC (546 People in Detention); Extrapolated, on a pro-rata basis, the cost of delivering comparable services at Curtin IDC and Northern IDC to estimate an indicative cost of delivering the comparable services at Wickham Point IDC at full capacity (1,500 People in Detention) Compared the indicative cost of delivering comparable services at Wickham Point IDC at full capacity against the offered cost by Foxy. The following factors need to be taken into account in conjunction with the calculations provided in this paper. 3 May 2011

27 The cost forecasts under the Serco arrangement have been calculated based on a simple pro rata basis, as no other alternative mechanism appears to exist to predict the future variables and pass through/mark-up costs that are unique for the Centre. The variables and the pass through/mark-up costs fluctuate significantly. Accordingly the pro rata based estimates may not represent the actual service fees under such categories. All dollar figures in the paper are inclusive of GST unless otherwise specified. 5. Limitation We note that there are a range of factors which impact significantly on the conclusions that can be drawn from the comparative analysis of the Foxy offer against the cost of delivering comparable services under the existing Serco contract: The fee for the provision of facilities management services at existing sites under the Detention Services Contract between DIAC and Serco is part of a holistic fee for the provision of a range of services. Whilst the pricing tables at Schedule 5 allocate a portion of these costs for the delivery of maintenance services, these are not necessarily indicative of the actual costs to Serco in delivering maintenance services as a stand alone service; The Detention Services Contract between DIAC and Serco is very complex, particularly in terms of the statement of works, the volume of requirements and the standard of services required. Whilst the Foxy offer comprises a range of similar services, it is not clear to what extent this will involve performance of the detailed requirements and service standards as are included in the Detention Services Contract. Definition of the exact scope of services and performance standards is likely to impact significantly on the cost of delivering the services. Serco s costing mechanism and the fees schedules contained in the contracts are not necessarily indicative of the actual service fees that are going to be charged to the Department. The actual service fees are heavily driven by the variables and the pass through costs that undermine the certainty of the actual service fees. Unique circumstances exist at each of the various sites for which sensible assumptions may be required. For example, service delivery at Curtin IDC is based on a remote model with labour costs based on a casual workforce operating on a fly-in, fly-out basis which impacts significantly on the overall cost of delivering services at these sites. The impacts of such assumptions are not easily quantifiable and are not reflected in the comparative assessment that has been undertaken. The pricing model for delivery of maintenance services at NIDC was developed as part of a holistic model for delivery of services across the entire Detention Services Network. Accordingly there are limitations in the conclusions that can be drawn regarding the cost of delivering maintenance services at NIDC as a stand alone facility. The pricing model for delivery of services by Serco at CIDC has been proposed by Serco but is yet to be accepted by the Department. The service fee has been paid in accordance with this model as an interim arrangement whilst contract variation negotiations progress, however the pricing proposal is yet to be formally accepted by DIAC or assessed as representing value for money. 4 May 2011

28 Foxy s quote is fixed on a per head basis and does not include a detailed breakdown of individual cost items or underlying assumptions. Due to limited degree of information, it is impractical to compare Foxy s quote directly to the Serco s costs for other facilities. 6. Sources of information Monthly tax invoices from July 2010 to February 2011 for the Northern Immigration Detention Centre. Monthly tax invoices from July 2010 to February 2011 for the Curtin Immigration Detention Centre. s 22(1)(a)(ii) s 22(1)(a)(ii) from to dated 24 February Serco Detention Services Contract Immigration Detention Centres Volume Foxy offer Foxy s quote is per head per day or per annum at the full capacity (1,500 persons) and includes the following services:- Management of assets; Maintenance of assets; Catering food and labour (including over-time); Cleaning all areas including clients; Linen service; Rubbish removal; Water and sewerage; Electricity and gas; Telecommunication (installation only, usage still to be met by the Department); Staff transport; Insurance; Environmental management; and Occupational Health and Safety (OH&S). It does NOT include:- Malicious damage; or Security or emergency management 5 May 2011

29 The following table outlines the service lines provided by Serco for other detention centres and the comparable services offered by Foxy. Foxy offer appears to include the items marked with. The marked items have been selected by description and may not necessarily comparable to the services that are contained the contract with Serco. In particular, it is unclear whether the offer by Foxy includes a commitment to provide the required services in accordance with the detailed requirements and service standards as prescribed under the Detention Services Contract between DIAC and Serco. Services People in Detention Services Well-Being of People in Detention Reception, Transfer, Accommodation and Discharge of People in Detention Individual Management Property of People in Detention Facility Management and Support Management of Assets Maintenance of Assets Centre Security and Emergency System Catering Cleaning Services (Admin only) Environment Management Occupational Health and Safety (OH&S) Management of Emergencies Business Services Business Services Plan Human Resource Management Alternative Detention Contract and Relationship Management Records Management Information Technology Requirements Incident Management Business Continuity Reporting of Service Delivery Quality Management and Continuous Improvement Stores Security Services Delivery of Security Services Entry Control Centre Security Transport and Escort Services Transport Escort Pass Through/Mark-up Costs Scheduled Maintenance Ground and Infrastructure Maintenance Included 6 May 2011

30 Alternative Detention Disbursements (Linen, Cleaning, etc.) Utilities Capital Works Loose Asset Purchases Additional Storage 8. History of Serco s service fees - NIDC The service fees charged for NIDC from July 2010 to February 2011 are outlined below. The items are the service requirements Foxy has proposed to provide which are relevant for the comparison further discussed below. Services Comparison Fixed Variable PTC Total People in Detention Services Well-Being of People in Detention Reception, Transfer, Accommodation Individual Management Property of People in Detention Facility Management and Support Management of Assets Maintenance of Assets Centre Security and Emergency Sys Catering Cleaning Services (Admin only) Environment Management Occupational Health and Safety Management of Emergencies Business Services Business Services Plan Human Resource Management Alternative Detention Contract and Relationship Mgt Records Management Information Technology Requirement Incident Management Business Continuity Reporting of Service Delivery Quality Mgt and Continuous Imp Stores Security Services Delivery of Security Services Entry Control 7 May 2011

31 Centre Security Transport and Escort Services Transport Escort Pass Through/Mark-up Costs Scheduled Maintenance Ground and Infrastructure Alternative Detention Disbursements (Linen, Cleaning, etc.) Utilities Capital Works Loose Asset Purchases Additional Storage Total Total Not GRAND TOTAL 9. History of Serco s service fees - CIDC The service fees charged for CIDC from July 2010 to February 2011 are also outlined below. Services Comparison Fixed Variable PTC Total People in Detention Services Well-Being of People in Detention Reception, Transfer, Accommodation Individual Management Property of People in Detention Facility Management and Support Management of Assets Maintenance of Assets Centre Security and Emergency Sys Catering Cleaning Services (Admin only) Environment Management Occupational Health and Safety Management of Emergencies Business Services Business Services Plan Human Resource Management Alternative Detention 8 May 2011

32 Contract and Relationship Mgt Records Management Information Technology Requirement Incident Management Business Continuity Reporting of Service Delivery Quality Mgt and Continuous Imp Stores Security Services Delivery of Security Services Entry Control Centre Security Transport and Escort Services Transport Escort Pass Through/Mark-up Costs Scheduled Maintenance Ground and Infrastructure Alternative Detention Disbursements (Linen, Cleaning, etc.) Utilities Capital Works Loose Asset Purchases Additional Storage Total Total Not GRAND TOTAL 10. Cost forecast based on service history NIDC can accommodate 546 persons at it full capacity. Where NIDC was run at its fully capacity, the average rate per head per day charged for the period from July 2010 to February 2011 and the estimated fee per annum for the services are outlined per below. 9 May 2011

33 CIDC can accommodate 1,200 persons at it full capacity. Where CIDC was run at its fully capacity, the average rate per head per day charged for the period from July 2010 to February 2011 and the estimated fee per annum for the services are outlined per below. 11. Comparison The table below provides a comparison, based on the Foxy s fixed quote and the estimates from s 47C(1) the Serco s fee history outlined above. 12. Additional information required As outlined above under Limitation, there are significant limitations in the conclusions that can be drawn from a comparative assessment of the Foxy offer against the cost of delivering similar services by Serco at other Immigration Detention Centres. In order to facilitate a more comprehensive assessment of value for money, DIAC may wish to consider one or more of the following options: Obtain from Foxy a detailed breakdown of individual cost items and underlying assumptions. This would allow an assessment of the reasonableness of assumptions proposed by Foxy in the development of its pricing proposal. Request Serco to provide an offer for the provision of maintenance services as part of its broader delivery of services at Wickham Point IDC so as to allow for a more directly comparable assessment of the offer between the two potential providers. Request the provision of an offer for the delivery of maintenance services at Wickham Point IDC from other potential providers through an open market or direct tender process so as to allow for a comprehensive assessment of the market value of the requested services 10 May 2011

34 11 May 2011