Lessons from the past
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- Learning from Failure: why large government policy initiatives have gone so badly wrong in the past and how the chances of success in the future can be improved
- Terms of reference
- The future: Avoiding repetition of failure
- Executive summary: 28 proposals for improvement
- Reflections on failure
- Lessons from the past
- A: Providing robust advice
- B: Supporting decision making
- C: Creating a positive risk culture
- D: Enhancing project management
- E: Opening up the APS
- F: Embracing adaptive government
- The future: Learning from mistakes
The HIP was a major project, the design and delivery of which involved massive failures and led to tragedy. The large-scale program was beset by far-reaching errors. Mistakes were manifold: irreconcilable policy objectives, flawed program design, rushed implementation and inadequate monitoring. Mediocre record-keeping makes it difficult to tell the full story of which public servants provided what advice to ministers when, and to what effect. Responsibility for decision-making was diffuse and opaque. Accountability for consequences was unclear. Yet it is apparent that the advice provided by public servants to ministers was, in many instances, poorly given, poorly received and poorly communicated. Consultation across government, between jurisdictions and with industry bodies was all but absent. Citizens were not consulted on what they wanted and installers were not asked how it would be best to deliver those aspirations.
The development and delivery of the HIP was not just marked by a plethora of mistakes: the consequences were stark. Four young workers lost their lives, houses caught fire and long-standing businesses were destroyed. It is important that the lessons of the tragedy are learned. It is vital that when governments decide to instigate large new initiatives in the future, that the process of execution has been improved. I hope that ministers, advisers and public administrators will be able to say that "we will never have another HIP: we have learned the lessons from what went wrong".
The Royal Commission into the HIP was established on 12 December 2013. Mr Ian Hanger AM QC was appointed as the Royal Commissioner and delivered his report on 29 August 2014. There had already been a number of other reports into the HIP, notably by dr Allan Hawke AC in his 2010 Review of the Administration of the Home Insulation Program and by the Australian National Audit Office (ANAO) in its Performance Audit Report No. 12 (2010—11). The program, and others explored in this review, provides a catalogue of lessons for governments here and around the world. They allow us to learn from failure.
In late 2008, Australia was facing a severe economic downturn. The Global Financial Crisis (GFC) threatened to end an era of prosperity. In response, the Australian Government deployed a range of measures to stimulate the economy.
On 3 February 2009, the Prime Minister, the Hon Kevin Rudd MP, announced a $42 billion Nation Building and Jobs Plan. Included in this plan was an Energy Efficient Homes Package, of which the homeowners Insulation Program (later renamed the Home Insulation Program or HIP) was a major component. Around $2.7 billion was allocated for the installation of insulation into the ceilings of some 2.7 million existing Australian houses over a period of two and a half years. The HIP was extremely ambitious in its scale. Prior to the announcement there were only about 200 businesses installing insulation into just under 70,000 homes annually. The HIP aimed to achieve a fifteen-fold increase in the number of installations carried out each year.
The objectives of the HIP were to create employment for thousands of low-skilled workers in the building industries, whilst delivering improvements to the energy efficiency of housing, and contributing to a reduction in Australia's carbon emissions. These competing objectives made the execution of the HIP difficult. Hanger emphasised the tension between the economic stimulus objective of the policy, which required the need for expedited progress, and its environmental objectives, which in normal circumstances would have been far more carefully pursued.
Things went wrong from the very start. The pre-announcement design of the HIP was rushed, with two officials required to develop a policy proposal over the Australia Day long weekend in January 2009. They were given express instructions " … not to contact industry and not to speak with colleagues". This set the tone of achieving speed by stealth. Many government decisions on the HIP were not subjected to the usual procedural safeguards provided by Cabinet process. Indeed much of the initial program development was overseen only by a sub-set of four ministers which, extraordinarily, did not include the minister responsible for the delivery department, the Department of Environment, Heritage, Water and the Arts (DEWHA).
The Prime Minister announced that the HIP would commence on 1 July 2009. That left just five months from its announcement to develop and begin to implement the program. In keeping with an ethos of supporting construction projects that were 'shovel-ready', the aim was to get public funds out of the door and pink batts into roofs as fast as possible. The start date was perceived as non-negotiable. Political imperatives dominated.
According to many witnesses to the Royal Commission, this led to "crucial and material compromises to the proper design and implementation of the HIP". Concessions were made in the name of expediency and had disastrous consequences: they included relaxing training requirements for workers, and assigning the skill competencies to supervisors rather than those performing the installation. This "unnecessarily exposed workers, particularly inexperienced ones, to an unacceptably high risk of injury or death". These late changes to the delivery model were imposed on DEWHA by the (now defunct) Office of the Coordinator General (OCG) in the Department of the Prime Minister and Cabinet (PM&C). Under political pressure, the OCG seems to have been driven by a 'can-do at any cost' mentality. The Royal Commission concluded that, "if given an extended timeframe [DEWHA] could have delivered the regional rollout program on which it was working". However, no evidence was found that a formal written request for a time extension was ever sought by any public servant.
It was not just that judgement was poor. Hanger found that DEWHA was ill-equipped to deliver such a large and complex program, even if it had not been rushed to deliver at scale from the outset. DEWHA's development and implementation of HIP coincided with a significant expansion of the department's responsibilities. It had little experience of delivering programs. It was unprepared for the task. Post-implementation reviews of the HIP identified problems with the department's governance structures, program design capability, corporate administration, risk management behaviours, audit and compliance mechanisms, and effective monitoring.  When the hon Greg Combet AM became Minister for Climate Change and Energy Efficiency in September 2010, he found that the APS had been ill-equipped to run the HIP program: "As a consequence, given the lack of systems—administrative, IT and financial—running that from Canberra was easily penetrated by fraudsters." Unsurprisingly, given the mood at the centre of government, DEWHA did not consult widely. There was insufficient consideration given as to how government intervention would impact a relatively small and largely unregulated industry. The Commonwealth abrogated responsibility for industry compliance and licencing activities to State and Territory governments but without listening to their frontline experience. Officials failed to talk to local government. Warnings from international experience were not heeded. In-house expertise was not developed and external advisers were inadequately briefed on their responsibilities. Time was not made available to organise pilots to test the suitability of the program design.
Confusion reigned. Roles within the Project Control Group (PCG) were not clearly articulated or understood. A deference to 'team-work' diffused responsibility for decision-making. Critical decisions, such as lowering training and competency requirements, were taken by the PCG in a committee environment which discouraged members from being active participants in the deliberative process. The outcomes failed adequately to address risks to the safety of installers. The perceived problems with the change to the delivery model by the OCG, which significantly increased implementation risks, were not communicated to senior officials and did not get updated in the risk register.  Similarly, while safety concerns were raised early in the HIP's implementation by industry representatives, they were not added to the register, and did not inform the risk management strategy. Warnings appear to have been ignored. Even in the late stages of the HIP, when the Australian Government had received specific advice about the risk of injury to installers and had the information necessary to make a decision to ban unsafe products and procedures, it was far too slow to act.
Of course, the responsibility of government for the proper design and implementation of the program in no way obviates the responsibility that businesses also had in implementing safe work practices for their staff. However, as program designers and contract managers, public servants should have made far more effort to manage a greater proportion of the risk of failure, particularly for project implementation and monitoring. Government, too, must take responsibility. All Cabinet ministers should have been involved in discussions of such a major project, including managing the risks. Ministerial advisers should have alerted their ministers to the changes. Senior public servants, too, should have exhibited greater fortitude in advising ministers and insisted on having their advice recorded, and (in the event that they could still not persuade government to agree to a more realistic timeframe), should have collaborated with State, Territory, local governments and industry associations to identify and mitigate the program's major risks.
As evidence accumulated on emerging problems, the HIP was formally suspended on 19 February 2010. Dr Allan Hawke AC was commissioned to undertake a review of the HIP. He recommended against its continuation. On this basis the Government formally terminated the program.
The fallout from the HIP was considerable. The consequences were tragic. The failure of the Australian Government to identify and manage the risk of injury and death to installers until very late in the HIP was a major cause of four young men dying whilst they worked on the program: Matthew Fuller, Rueben Barnes, Marcus Wilson and Mitchell Sweeney. This is a consequence that their families will live with forever. Some workers and home owners were injured and have ongoing health issues. It contributed also to house fires attributable to poorly installed (and unchecked) home insulation. Previously viable businesses became insolvent and many business owners lost their livelihoods. Large sums of public money were wasted on delivering a major project ineffectively. The government also found itself having to commission, assist and respond to eight inquiries into the program.
There was also a large financial impact on the Australian taxpayer for remediation. On termination of the HIP, two safety programs were established. These programs were implemented at a cost in excess of $100 million. In addition, two industry assistance schemes were established. The total cost of remediation was well over $400 million.
In late 2014, the Coalition Government instigated further measures in response to the Royal Commission. These included making payments to the families of the deceased installers; providing financial compensation to pre-existing insulation businesses adversely affected by the HIP; improving safety for workers in roof spaces; ensuring future Commonwealth programs would minimise work health and safety risks; and addressing APS Code of Conduct matters relating to the of the roles and responsibilities of individual public servants during HIP.
My review of government processes for implementing large programs and projects is part of the suite of actions that have been set in train. The Minister for the Environment, the Hon Greg Hunt MP, has asked for an independent assessment of the failures identified in the Royal Commission (as well as the Independent Audit of the NBN Public Policy processes). The review is to identify what lessons can be learned both by ministers and public servants and to provide practical recommendations to enhance the capacity of the Australian Government to deliver large programs and projects. The starting point is clear: HIP was an unmitigated disaster that need never have occurred. The capacity of the Australian Government needs to be enhanced. Ministers, their advisers and public servants should all heed the lessons.
The review is also to consider the design and delivery of another large public program, the NBN. The idea of the NBN was taken to the 2007 federal election by the Labor Opposition, with the ambition of providing all Australians with fast broadband to their homes and businesses. In government, Labor sought to implement its mandate. It proved difficult. The NBN implementation design had to be changed quickly and substantially after a tender process conducted in April 2008 did not result in any viable proposals. A revised approach was developed in January 2009, with the establishment of a new Government Business Enterprise (known as NBN Co). At that stage, the legislative and regulatory framework of the program was still undefined.
The 2014 Independent Audit of the NBN Public Policy process, conducted by Mr Bill Scales AO, identified significant failures. Many echo and reinforce the problems identified with the HIP. They relate to 'closed-door' policy design. Scales emphasised that the process for the development of the revised design of the NBN did not involve any consultation with industry. The proposal did not include any cost benefit analysis or business case. There was poor understanding of risk and its management was sub-standard. Scales saw the development of the NBN as a program that never clearly defined the problem that it was trying to solve: instead, it assumed that the answer was already at hand. 
Common to the development of both the HIP and NBN was a poor comprehension of the operating environment for the programs. There existed little or no understanding of industry dynamics and regulatory frameworks, nor of the manner in which government intervention would affect businesses. Scales found that NBN Co was not fit for purpose. In comparison to established telecommunications companies, it did not have the capacity to deliver outcomes in the timeframe determined by the government. Furthermore, the APS was unable to influence the discussion of risks with the government. Scales suggested that the issues which he identified were characteristic of a deeper problem within the public service.
The HIP and NBN are not the only large government projects that have been marked by poor design and/or inadequate implementation. They are simply the two most recent egregious examples. The BER was another part of the then Government's economic stimulus package. Administered by the Department of Education, Employment and Workplace Relations (DEEWR), most of the $16.2 billion program was designed to provide schools with new and refurbished school halls, libraries and classrooms.
Following fierce public controversy about whether the program was delivering quality outcomes, the Government established a BER Implementation Taskforce in April 2010. The Taskforce, headed by Mr Brad Orgill, presented its final report in July 2011. Whilst the report found that the projects were successfully delivered, it also identified significant variations in infrastructure cost, with public schools in Queensland, New South Wales and Victoria paying an average of 25% more than Catholic schools and 55% more than independent schools. Mr Terry Moran AC, who was Secretary of PM&C at the time, was of the view that the BER should have been undertaken in tranches to create flexibility and, if necessary, halt the process. In the absence of staged implementation the program, according to the political commentator Paul Kelly, "was inefficient, failed to deliver value for money, and its waste became a political issue… quotes were inflated and the work was often sub-standard." A 2014 academic study examined whether the BER was "another case of government failure". It concluded that it represented a case study of how governments should not pursue large-scale expenditure programs. The BER, it was argued, failed to deliver value-for-money.
Jane Halton AO PSM
"I think we have a fantastic quality of public servant in Australia and I do think our history of innovation and our history of staying at the cutting edge is an important legacy that we need to honour, so the opportunity to look at how we do our business and to improve it is a terrific opportunity and I think everyone should embrace that." (November 2014)
Jane Halton is the Secretary of the Department of Finance
Beyond the HIP, NBN and BER failures, there are lessons to be learned from many other major projects, both in Australia and overseas. Many involve the introduction of new information technology. The implementation of the former Australian Customs Service's Cargo Management Re-engineering Strategy was woeful. According to the ANAO, "the management framework that Customs had in place to support the project lacked many of the basic fundamentals necessary to successfully implement a large ICT project." From 1999 to 2006, costs blew out from $30m to $205m and recurrent failures resulted in severe adverse business consequences for importing industries. Because of the incompatibility of importers' legacy software with new cargo management systems, coordinating cargo became extraordinarily difficult. Similarly, the disastrous opening of London Heathrow's Terminal 5 in 2008 saw thousands of bags caught up within the airport's handling systems. The backlog was attributed to a lack of thorough and realistic operational planning for the launch and inadequate staff training in new ICT systems. Over-optimism and inadequate appreciation of the complexities inherent in implementing ICT systems seem to be recurring causes of project failure. In fact, only 6 per cent of large software projects from an international sample between 2003 and 2012 were on time, within budget, and had satisfactory implementation.
Reading reviews of failure can be a dispiriting exercise. It can also create a distorted perception of reality. Reform of the implementation of large programs and projects should not just be based on a litany of what has gone wrong. Many things go right and, for that very reason, go unnoticed. It is important to acknowledge what has worked in Australia and around the world and looked for what the common drivers of success seem to be. These are reflected in my conclusions.
It is important to emphasise that the APS has not been waiting passively for this report, steeling itself for its recommendations. Already, significant new approaches are in train to improve the quality of public administration. Since the HIP, the Department of the Environment (DEWHA's current successor) has made deliberate improvements to its program management capability, particularly in gauging pressures and risks in early program design, monitoring the challenges that emerge during implementation, and setting an expectation of high-level management attention and strong collaboration with external stakeholders. There is widespread recognition of the need for continued reform across the APS. In some areas things are moving too slowly: in many instances, public servants themselves would like to progress faster. I hope that I have been able to capture the underlying frustration of many public servants: that it is difficult to make the key changes which they believe can improve the influence of the innovative ideas they have; strengthen the advice that they provide; enable them to be more responsive; and enhance their capacity to deliver and evaluate major projects that the government instigates. Progress would be enhanced if the Government was explicitly to authorise and encourage the change process. The six reform directions identified in this review seek to provide a coherent framework for a structured conversation on the failures that have occurred, the lessons that are being learned and how they can be most adequately pursued.
 Hanger, I 2014, pp. 241-268.
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 These were the Foil Insulation Safety Program (FISP) and the Home Insulation Safety Program (HISP).
 These were the Insulation Workers Adjustment Package and the Insulation Industry Assistance Package.
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