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THE expansion of Newcastle Art Gallery has been described as the most mismanaged project ever undertaken in the city, and a diabolical disaster that seemed to lurch from one crisis to the next.
It has so far cost the city’s ratepayers more than $3million, and they are likely to have their hands deeper in their pockets before they get to see a brick being laid.
Mismanagement, a clash of egos, a lack of will, a shortage of money and pure political whim have bedevilled the project since it was first proposed in 2005.
‘‘If everyone involved really wanted it to happen, it would have happened,’’ architect Peter Smith said.
Newcastle council general manager Ken Gouldthorp, on receiving an audit on the project’s history last year, said it ‘‘was among the worst-managed projects I have ever seen in local government’’.
Former gallery foundation chairman Robert Henderson said that though ‘‘it’s true that I thought McCloy had undermined the project, if we’re going to talk about blame, I’d have to include others’’.
Former lord mayor Jeff McCloy said that after he was elected in 2012, it ‘‘didn’t take me long to realise how badly the whole thing had been managed’’.
‘‘It wasn’t undermined,’’ he said. ‘‘I was trying to get to the truth and the truth wasn’t real pretty.’’
Current lord mayor Nuatali Nelmes said, ‘‘I don’t believe it was diabolical.’’
‘‘I’m not laying blame on anyone, but good management should have sorted it.’’
Documents and emails obtained by the Newcastle Herald through the Government Information and Public Access Act shed new light on the extent of the mismanagement.
Newcastle council first engaged potential developers through a design competition in 2005. It cost ratepayers $225,895.
Between 2006 and 2008, LAB Architects won the design competition but its employment was terminated when the price tag of its design topped $50 million. It cost ratepayers a further $186,046, including a claim against the council by LAB.
Between 2008 and 2011, ratepayers shelled out a further $292,357 for government architects to rescope the design in conjunction with Clare Design.
Council reports show a further $364,311 had been spent on consultants to that point, while it cost the council $700,000 in internal staff costs. In total, ratepayers had already been savaged for $1,786,609 for a gallery they still couldn’t afford.
In 2012, the plans were put back on the agenda by then lord mayor John Tate, despite ratepayer surveys putting the gallery project at the bottom of nine priority projects and the council’s bottom line already in the red.
The Tate council, which included Ms Nelmes and now Newcastle Labor MP Tim Crakanthorp, voted to put the design out to tender and bring the project’s total cost to under $21million – $14million for construction and $7million for consultancies and other costs. The move came despite the council only having $7million and a commitment of a further $7million from the federal government.
They awarded the detailed design tender to Smith & Tzannes Architects on a contract fee of $830,095.
A month later, the development was approved by the Joint Regional Planning Panel but cracks began appearing in the project’s costings.
Smith & Tzannes brought Clare Design in on the project, with council officers approving an additional $59,000 contract variation.
The elected council, though, didn’t know about it.
Over the next few months, council officers and a project control group authorised a further $220,000 in cost variations. The elected council was never told about the cost blowouts.
On the project control group at that time were then-general manager Phil Pearce, department directors Frank Cordingly, Peter Chrystal and Martin Swan, art gallery director Ron Ramsey and his deputy Tristen Sharpe.
Mr McCloy was elected lord mayor in September 2012. He ordered an audit report on the project’s history which found an ‘‘intolerable lack of probity, transparency and accountability’’, ‘‘unacceptable reporting to council ... of significant capital works’’, ‘‘unnecessary costs paid by council’’ and a ‘‘lack of specific authorisation’’ around ‘‘variations of contract works’’.
‘‘I also discovered that the council was already in breach of the federal funding conditions,’’ Mr McCloy said. ‘‘It was conditional on the state government coming good with $7million within six months and that hadn’t happened. The federal commitment had already expired but none of the councillors were even told. What a mess.’’
The project control group was restructured after a motion from Cr Crakanthorp, who became group chairman. Cr McCloy was included along with fellow councillors Andrea Rufo and Therese Doyle, plus gallery foundation chairman Robert Henderson and gallery society president Pru Viggers.
Letters between the council and the architects, obtained by the Herald, show significant conflict had emerged over the tender document awarded to Smith & Tzannes by the previous council.
‘‘Our contract was to deliver the detailed design on the approved DA [development application],’’ architect Peter Smith, from Smith & Tzannes, said. ‘‘We knew very early on that there were problems with costings and what was included in the government architects’ figures and what wasn’t included in the tender documents. There was also a misalignment between what we were told was available for the project and what was actually available.’’
At the same time, the architects began referring to ‘‘the client’’ as ‘‘Ramsey, Henderson, Sharpe and Jaeger’’ (as in council director Judy Jaeger), and changes were being made to the original design.
The changes included the addition of an atrium and a roof-top terrace, adding to the construction cost instead of stripping it back, although Mr Smith said these ‘‘add-ons’’ were later removed.
Mr Smith sent a detailed letter to council director Frank Cordingly. He argued the council tender was based on incorrect costings from the government architects and didn’t include a number of items including the gallery fit-out.
The total project cost was estimated at $22.5million, he wrote. And when other factors were included, it grew to $25.6million.
And it got worse.
‘‘We were surprised to review the draft project budget which included a total project cost estimate of $28.725million,’’ Mr Smith wrote.
‘‘We have worked [with council] to clarify these items and further items have been identified. Currently the identified project cost is $30.4million,’’ he said before detailing ‘‘previously unidentified costs’’ of $4.8million.
It took Mr Cordingly almost three months to respond, but he insisted the council’s tender was clear – the project had a $14million construction cost, a $21million overall budget, of which only $14million had been committed because the state government had yet to agree to any funding.
By March 2013, Mr McCloy had seen enough, storming out of a project control group meeting after less than a minute. Mr Henderson said that had he stayed, he would have seen the architects’ plans to bring the project under the $21million budget.
Two weeks later Mr McCloy used his numbers on the council to put the whole project on ice until the state government made a funding commitment.
‘‘I had to go and lobby [then Newcastle Liberal MP] Tim Owen and the state government for $7million but all I could show them were a few sketch plans on a project that had three or four different costings,’’ Mr McCloy said.
‘‘No wonder they didn’t want a bar of it. It was a mess and the project control group was more like an out-of-control project group.’’
The state funds never came, and while federal Labor MP Sharon Grierson had convinced the federal government to extend the time limit on its financial offer on three occasions, it wasn’t interested in a fourth, and withdrew.
Documents also show that ratepayers were still shelling out money even after the council had voted to shelve the project. On June 11, 2013, Mr Ramsey and Ms Jaeger signed off on a further 13 contract variations which cost ratepayers another $418,329.
The project group knew about the variations, but not the elected council nor general manager Mr Gouldthorp, and they are supposed to be informed of tender variations worth more than $150,000.
‘‘It was a complete mess,’’ Mr McCloy said. ‘‘Mainly because the project was being driven by a cheer squad for the art gallery instead of people who knew what they were doing.’’
Mr Henderson agreed that the project had been ‘‘seriously mismanaged’’ but ‘‘the wrong people were blamed’’.
‘‘It was unfair that all the council cock-ups were blamed on Ron Ramsey and Judy Jaeger when [others] were supposed to be running the show,’’ Mr Henderson said.
‘‘We eventually delivered on a $21 million project,’’ Mr Smith said. ‘‘But there had been conflicts within conflicts and ... misalignments on tender costings. Had we have known from the outset, I doubt any of us would have proceeded.’’
The Smith & Tzannes report was finally delivered to the council 14 months after it was supposed to have been finished.
By that stage, including the $1,786,609 spent on the project before the Smith & Tzannes contract was tendered, the total costs had topped $3.2million.
