Claims of $300m reward for office squeeze unravel after audit

Coalition government claims it will save $300 million by squeezing public servants into wasted office space have unravelled in an audit showing they were based on untested estimates.

The Finance Department overseeing the bureaucracy's spending in some cases overestimated the pay-off from efforts to cut unused floor space, a national audit has found.

Expected savings used to justify changes to the way the Australian Public Service manages property leases - reforms resisted by some agencies - were also based on untested figures from consultants, the national auditor has found.

His report, tabled in federal parliament on Tuesday, revealed losers in Canberra's office rental market as the Coalition moved agencies out of buildings when leases expired and shifted them into unused space elsewhere.

Auditor-General Grant Hehir's finding that Finance failed to test savings estimates as the Coalition embarked on the project to cut wasted floor space, dubbed "Operation Tetris", brings into question the estimated multimillion dividend from the project.

The agency also appeared to ignore modelling from a consultant that may have let it provide a more accurate savings estimate.

Lease agreements between agencies show the government may save less than estimated by the Finance Department, which based its figure on a simple formula multiplying the average cost of floor space and the size of wasted space filled.

The agency gave no evidence supporting its estimate of the average rent paid at the time, had assumed agencies would have leased the same amount of space if they had not moved, and that leases would last 10 years.

Finance originally estimated a Veterans' Affairs move into the Tax Office's leased premises in Canberra would save $49 million over 10 years, higher than the savings indicated by the Australian National Audit Office’s analysis ($33.1 million).

"Relocation and other associated costs were not addressed by Finance’s methodology," the report said.

"In July 2018 Finance commented to the ANAO that costs such as fit-out and relocation would apply regardless of whether the entity moved under Tetris or into a new lease.

"The ANAO’s analysis was that this assumption did not necessarily hold."

The project had reduced surplus office space, coordinated how departments bought property services and improved the collection of property data, the audit found.

Estimated savings from reforms to the way the bureaucracy's managed leases drew on figures from only a handful of private operators and were not checked against the needs of government departments, the audit found.

"Finance did not conduct additional testing of the savings estimates provided by its advisers, advising the ANAO in June 2018 that it 'accepted the savings estimates put forward by its expert advisers and, therefore did not undertake a separate analysis'," it said.

Despite this, the department advised the Coalition as the government decided whether to coordinate how the bureaucracy bought property services.

A reshuffle moving bureaucrats across offices in Canberra has shifted them between several buildings in the city, New Acton and the parliamentary triangle at an estimated annual $27.4 million saving to the government.

The upmarket Nishi complex received public servants from Safe Work Australia, Austrade and the Department of Communications and the Arts as properties in Mort Street, Moore Street, Marcus Clarke Street and London Circuit lost government agency tenants.

Woden lost two major tenants when the Department of Veterans' Affairs left its Keltie Street offices in Phillip and the public service commission left the suburb for the Treasury building.

The Finance Department agreed to the report's recommendations to improve its methods for estimating savings.

This story Claims of $300m reward for office squeeze unravel after audit first appeared on The Sydney Morning Herald.