3:41 PMComments on Manningham's large Capital Works Budget ($32m) - 2013/2014.
Comparing the council's capital works budget with things we are familiar with in the private sector, we get the impression that costs for the council are out of control.
Please see the 2013/14 capital works budget document. Appendix C itemizes the budget and Appendix D details the proposed capital works out to 2022/23. As we look through the budgeted items, we see very large amounts of money.
Lets consider what these amounts would buy in the private sector.
First, it is hard to assess whether many budgeted amounts are reasonable because we are not given an idea of the scope of the work.
So I thought I would look at something more mundane. On page 71, $250,000 is budgeted for a Toilet Block in Macedon Square.
Manningham Council is going to spend a quarter of a million dollars for an outside toilet? Does this sound a bit much to you?
It is true that such public facilities need to be built well. But often such things are made well by making them simple and solid. They are often made out of steel, concrete slabs and thick timber. The electrical work can be simple however the plumbing may be a bit more involved. But still, doesn't $250,000 sound a bit much?
I thought I would find out what a quarter of a million dollars would buy in the private sector.
I am not advertising Simonds Homes but I think you get the idea. Similar examples could also be drawn from Ashford and Metricon Homes.
Public toilets are simple but solid structures. Whereas residential houses require a lot more material and labour. Think of all the things that go into a residential house: the framework, brickwork, rendering, painting, roofing, plastering, extensive electrics, extensive plumbing, flooring and carpeting, cabinet work, glazing and so on. Building a residential house is labor intensive and requires a lot of material.
It is true that a public toilet needs to have water, sewer and electrical services. But so does a residential house. And a residential house also needs gas and telephone services. And no doubt the suppliers of public toilets have a product range to choose from, as do the builders of residential houses. The differences and similarities could go on.
But whichever way I look at it, a lot more labor and material goes into a residential house. One is a simple durable box often made out of steel and concrete. The other is a fully serviced, well appointed, spacious, luxurious house.
$250,000 for an outside toilet seems way over the top. And this is not the only instance. In 2015/16, the council plans to upgrade a public toilet in Wonga Park Reserve for another $202,000.
A business owner gave me a lesson in Government finance - the higher the price the greater the sales.
When I was going through university, I worked part time at an aluminium fabricator. One item we made was medicine storage cabinets for pharmacies. The owner tried to sell these cabinets to a government hospital. They replied by saying that, at the price he was asking, they simply could not be any good. My boss had an answer. He trebled the price and I think he anodized parts of them in a different colour. The hospital purchasing people were so stupid, that they then bought a large number of them! It was essentially the same cabinet but for three times what the pharmacies paid! We all had a good laugh.
This stupidity is also found in large private sector organisations where no one is responsible.
Some time ago I needed to have some repair work done on a car that was involved in an accident. The car was comprehensively insured. At the first repairer, I said it was an insurance job. They gave me a quote of $6,500 (plus GST). So I took it to another repairer but this time I said it would to be a private repair job. The price I was quoted was $2,300 (plus GST) for the exact same repairs. Why this rediculous difference?
I got annoyed with an insurance company about this some time ago. I was involved in a different accident with my company car and I was required to get three quotes and submit them to the insurance company. But with one of the quotes, I said it was a private job. I submitted this quote along with the other two and sat back to see what would happen.
Sure enough, I got a phone call from someone in the insurance company, wanting to know why this one quote was so low. He said it was simply not possible for the repairs to be done properly at that price.
I told him what I had done and he would not believe it. I told him that he was being ripped off and we were paying for it with high insurance premiums.
He would not accept a word I said. He was in his own little world. To him, outrageously high repair bills were the norm and he dutifully paid them. He was unwilling to see outside his bubble. To do so would upset his little world and create waves at his workplace and possibly bring him problems. And after all, it was not his money, it was the companies and the policy holders! So why should he worry?
And what is worse, instead of managing their way out of this, car insurance companies add to the problem by insisting repairers give them long term guarantees for repair work. This further increases the price and reinforces and justifies the wasteful situation the insurance companies have allowed themselves to get into.
For Manningham council, being ripped off and over-changed is the norm.
I think the problem is the same for our local council. When a company quotes a price for government work, the price goes up. All the suppliers do this. This becomes the norm for the council and the council rationalizes the high prices they pay.
Council bureaucrats do not want to see or even acknowledge what is going on. To do so would rock the boat, create problems and extra work. And after all, who cares, it is not their money, so why worry?
I think it would be fair to say that if our Council's capital works projects were re-quoted as though they were work to be done for private individuals, the costs would be half or even less. If the footpaths we are going to pay around $702,000 for were being done for a private organisation, we would be paying a lot less for the exact same work.
It's not their money. All they need to do is protect their jobs and their pension plan.
The only way to solve this, is to link Council pay to cost reduction, efficiency gains and quality improvements - the same as it is in the private sector.
Our council often claim that their remuneration packages should be on par with managers in similarly sized, private organisations. As you can see, there is really little similarity between managers at our council and those in the private sector.
20 May 2013.
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