Even as extraordinary media performances go, this was special.
Treasurer Kevin Foley stood at the lectern to announce that his government would sue the French-owned company which manages Adelaide’s water supply – United Water International, which supplies every drop to every tap in every home, factory, office, restaurant, hospital and school. It gets flush when you flush.
For 30 minutes Foley faced the media, flanked by Water Supply Minister Karlene Maywald, SA Water Board chair Philip Pledge and assistant Crown solicitor Chris Gray. The Government had filed proceedings in the Supreme Court, the Treasurer said. Damages claimed by the state could be in the order of “tens of millions of dollars”. And then Mr Foley launched one of his trademark attacks on the Liberal Party and the press, and “socialists” who asked for details of the secret water contract now in dispute.
So even as extraordinary media performances go, this one was a triumph. The Treasurer obfuscated, harangued, and washed his hands.
But still, water contracts run deep.
In 1995, Adelaide’s independent media broke the news that the Brown Liberal government was on the point of privatising a huge, profitable arm of what was once the pearl in the coronet of the state’s public service: the mighty Engineering and Water Supply Department, the old E&WS.
For one-and-a-half centuries the department had provided safe, affordable water to Adelaide. It also provided government with a safe, reliable stream of income – a $71.5 million profit in 1994. Premier Dean Brown and his Infrastructure Minister John Olsen planned to hive off the management of metropolitan Adelaide’s water and sewerage infrastructure. Our water would be cheaper, they pledged, and SA would develop an industry which would make the state a world leader in water management.
The public’s reaction was outrage. Ninety-two per cent of the 4000 respondents to a Channel 7 poll voted for an immediate referendum to stop the Government’s plan. On ABC local radio, the same proportion said they didn’t want outsourcing, and referendum be hanged.
Alarmed, the Brown-Olsen government divined its own poll which showed that fewer than two in 10 people supported the plan. At first the Government denied the poll’s existence and then refused a Labor Opposition freedom of information request for its results. “The Brown Government will have to explain why releasing the public’s views is not in the public interest,” feigned Opposition Leader Mike Rann, and people believed him.
Labor also criticised the Liberals’ $650,000 fee to public relations consultant Ian Kortlang for his work on the privatisation, with Mr Rann decrying the use of taxpayer funds for political propaganda campaigns. It was a massive and massively long contract worth more than $1.5 billion. Local, national and international water engineering companies leapt at the offer. Consortiums bid as public anger intensified.
Don Dunstan, the former Labor premier, became part of the Coalition Against Water Privatisation to stop SA Water falling into private hands. He was joined by other Labor stalwarts – Gail Gago, Peter Duncan and Gordon Bilney from a bygone age. “I don’t think a public resource should be turned to individual profit of particular companies,” said Adelaide University Professor George Ganf at the time, and his stance was backed by the entire Labor Opposition.
“We are most concerned about reports in European newspapers detailing allegations of corrupt practices where water has been privatised,” Mr Rann told this reporter in June 1995.
In the same conversation shadow infrastructure minister Kevin Foley agreed with his boss. “This is simply too important,” he told his interviewer. “We’re talking about water – something on which we rely for life itself. It must remain under total state control. There has to be public accountability from source to tap, all the way.”
Water-boarding would have been almost preferable to watching the now State Treasurer choke on those same sentiments this week. In Opposition he railed against secret contracts between government and big business. On Monday he sneered at people who ask why he does not do so now.
Silly, he called them. Socialist, too.
Like every SA Labor candidate in the 1996 federal election, the federal minister for industry, West Australian Senator Peter Cook in a Labor Government, campaigned “to make the State Government release more details of the secret, 15-year-long contract”.
Senator Cook did not live to hear Mr Foley’s insult on Monday. He died in 2005, his funeral attended by Kim Beazley. “I will miss him deeply and his wise counsel, having worked with him on so many campaigns,” Mr Beazley wrote.
But 1995 was a simpler era. Three companies were short-listed for the lucrative contract: the British North-West Water, the French Lyonnaise des Eaux and the English-French consortium Compagnie General des Eaux/Thames, which had a small, 6 per cent local equity interest through Kinhill Engineers.
Brown-Olsen, of course, promised local control, local industries, lower water prices and a fair slab of local ownership. The wags said General des Eaux was General des Odour. An independent reporter’s investigation at the time revealed there was nothing to stop complete foreign ownership in future. “Show us the contract,” the Premier was implored, and the Premier declined. Brown-Olsen promised there would eventually be 60 per cent South Australian equity in the successful contractor. He was wrong by a factor of 60 per cent.
Adelaide’s only non-Murdoch newspaper at the time reported that neither Thames Water nor General des Eaux were above suspicion. It found that Thames was in hot water over a privatisation deal in Thailand, with a $30 million bribe allegedly offered by Thames to a senior Thai minister, and that General des Eaux was under investigation for kickbacks to the mayor of the French town of Grenoble.
In Adelaide, the General got the contract through a process that can not only be described as interesting; a more accurate descriptor is dodgy.
Now calling itself United Water and with assets of only $3, its bid arrived four hours after final cut-off. By that time rival bids had been opened, photocopied, and distributed to six people not authorised to see them.
None of that seemed to worry the Government. It had Richard Nixon’s Rose Mary Woods on side. The security camera ran out of tape in the room during the crucial period – the famous missing gap.
And the bloke who was supposed to check that process was conducted properly, the so-called Probity Auditor, left the building with Elvis before the United Water bid had even arrived.
The water privatisation would have been scrapped had it been organised like a normal tender process, reported Auditor-General Ken MacPherson. Too many “irregularities”, he said politely.
The Adelaide Advertiser’s treatment of the scandal was as scandalous as the scandal itself. On October 17, 1995, Advertiser journalists were secretly briefed before Parliament had been informed about the result of the biggest contract signed by any government in any state since federation.
The ’Tiser’s pre-prepared puff piece did not mention any criticism of the process or the privatisation. Other headlines followed: “SA firms tap into $500 million deals” and “SA Water winner’s share plan”. It was fantasy, all.
So fast forward to 2009, and to a Labor Government fighting an election in seven months and great community concern over water. Water’s expensive, and getting more so. Water’s been rationed for the first time in 40 years. The promised water industries were mirages in the desert. The local equity partner has morphed into a Foreign Legionnaire and decamped with his camel. United Water is now a wholly-owned subsidiary of the French giant, Veolia, which has global interests in water management and treatment. Its portfolio of interests resembles an atlas. It’s in 42 countries from Turkey to Russia, Saudi Arabia and the poor old Netherlands, which is already half under water. Veolia is to South Australia what Jupiter is to Io.
Aquarius, the water carrier, was thought by ancient Greeks to have poured the water that flooded earth and caused the Great Flood. In South Australia, United Water doesn’t own the pitcher. All the water infrastructure – the dams, the pipes, the sewerage lines – are still owned by SA Water. United Water’s role is the management of that infrastructure. SA owns the pipes; United fixes them when they burst. They charge for this. A lot.
Olsen himself tabled almost 800 pages of water contract-related documents in Parliament on February 4, 1997. The Supreme Court claim further outlines how United can charge what it does. To properly understand this we need a bottle of Veolia or something stronger, a Supreme Court judge, a brace of commercial lawyers and some insight not yet provided either by Mr Foley or by United, which has all but refused to comment through this flood of litigation.
The 17-page Statement of Claim can roughly be defined with one phrase in layman’s language: “You’ve ripped me orf!”. It goes through particular clauses, claiming United broke one or more of them, and alleges United engaged in misrepresentation and deception. Liberal Leader Isobel Redmond, a barrister-solicitor, has studied the claim and puts it like this: “Essentially the Government is claiming SA Water received bills from United that included research, business and industry development costs in breach of the contract and included all of its corporate overhead costs, including things that happened in New Zealand and Ballarat.”
It thereby breached its contract. SA Water wants the money back, and reckons a few tens of millions might square the account and let bygones go by.
But why hasn’t the Government acted until now? The most recent contract review was signed, as the court documents reveal, on April 29, 2003, more than a year after the Rann Labor Government came to power. Mr Foley had a hard time explaining that, and his explanation was equally hard.
“What occurred in 2003 under our Government was the finalisation of a few operational issues relating to things such as a new call centre and a few other operational matters,” he said. “There was no legal basis for which we could renegotiate that price until the next review which occurred in 2006. And we’ve been in dispute with United Water since 2006. The very first opportunity the Labor Government had to alter the price was in 2006.”
That was, however, three years ago. The Treasurer agrees that one can subtract 2006 from 2009 and arrive at that figure.
“We’ve been in dispute with this company now nearly three years,” he admitted.
Mr Foley is very, very keen to blame the Liberals for this boondoggle. In two radio interviews the morning after his media conference, Mr Foley named prominent Liberal frontbencher Rob Lucas “and his government” some 32 times as being responsible, even though Mr Lucas personally had as much to do with the water contract as Kevin Foley has to do with the Office of the Status of Women. And Liberal Leader Isobel Redmond says not to go blaming her. She wasn’t even in parliament in 1995, she pleaded, when the Liberal Government signed the original contract.
The Treasurer was playing more games than an otter at a fish wharf. His media conference implied that the Government was already suing United, whereas actually SA Water had simply filed proceedings in the court and had not served United with the papers.
Foley and his team have six months to do that, by which time there’ll be a lot of water under the bridge and a state election almost washed away. There is, as one Rumple told The Independent Weekly over a Crown and Sceptre port, absolutely no chance that this case will be heard and decided before the March poll. South Australians will go to that election believing that Mr Foley and his Musketeers will battle the big bad French guy, and win.
Commercial law observers approached by The Independent Weekly think that the Government’s Statement of Claim may have some merit. Crown Law staff say off the record that they believe it has a reasonable or better-than-reasonable prospect in the case, while SA Water, now gutted and demoralised by years of attrition but still employing experts prominent in their field, is almost cocky over the outcome. The chair of SA Water, Philip Pledge, once chaired the SA TAB, so what’s the odds he would be betting long? Treasury is also believed to have waved a hand over the contract and the claim, and thinks a case could even recoup its inevitably high legal fees. Private practice QCs are dusting off their wigs and gowns in anticipation. That might be presumptive. An out-of-court settlement is more likely, and for far less than Foley’s “tens of millions”.
Meanwhile, what are the chances of Foley ripping up the United contract when it finally expires next year? What chance of rebuilding the great institution that was once SA Water, with public-sector engineers of world standard, humane work practices and local ownership?
Absolutely nil, as The Independent Weekly reported exclusively last year.
The Treasurer, however, answered less succinctly. “That’s a matter we need to consider in the cool light of day,” he said in the heat of the moment. “We have to look at renegotiation or, sorry, retendering and obviously the issue of whether or not the Government should retain services is an option. It’s unlikely because so much has changed. Workforces have been privatised. It would be a very difficult exercise to sort of put the egg back together.”
While Mr Foley was at his media briefing, site preparation was underway at Port Stanvac for the next phase in SA’s water privatisation: the $2 billion desalination plant, to be designed, built, commissioned, operated and maintained by AdelaideAqua, which is a part of Abigroup Water, which is part of Bilfinger Berger Aust, which is a wholly-owned subsidiary of Bilfinger Berger AG, from whose corporate windows in Mannheim its directors can feel the River Rhine slide past. Bilfinger Berger AG is as German as Veolia is French.
South Australians have already learnt not to trust the Liberals with privatisation. They’ve also heard Mr Rann rail against it in Opposition.
In 1984 George Orwell warned of pigs turning into the deadliest enemy, humans. When Labor behaves like Liberal, Senator Peter Cook and Don Dunstan must wonder if somebody’s slipping something funny into the political water.