It is my opinion you have not received good advice from Council Officers in this matter, nor have you been fully informed in respect to important events which arose prior to you voting on this tender.

I would now like to discuss these events which as a Councillor you have the right to know about. In the past 10 years I have been a regular patron of the BAC. As some of you know I am a former senior partner of BJT Legal. Before I retired I was an accredited commercial law specialist and practiced in this area for 30 years. For 10 years I was president of the Ballarat Small Business Association and for the last 10 years have run a business consulting to business. I have helped run two large businesses. I think I know how successful businesses should be run.

It is my opinion and the opinion of other users of BAC that the YMCA has run the centre poorly for many years. There has been a lack of good management and leadership. Staff morale was poor and the centre was not properly cleaned. The staff some of whom are my friends are good people but lacked good direction, training and control. My regular friends at the BAG use to joke that we should not complain because if it was well run it would be busier in the gym and in the swimming lanes which would inconvenience us.

Centre Attendance Numbers

It is very interesting to note that in the tender documents it shows that total attendances have dropped from 606,391.00 in 2004 to 511,225.00 in 2011 and this is after a $5,000,000.00 extension and refurbishment. In 2008 it had dropped to 460,000.00 you can make your own conclusions about this.

In July 2011 I returned from a trip to Canada where I had swum on most days in many pools which were all kept in an excellent condition. I was appalled at the cleanliness at the BAG. I suppose prior to my trip I, like most of my friends that used the BAC just got conditioned to dirty conditions and accepted them.

The men's change room and showers were filthy. In the showers there was a build of green slim on the tiles. The whole floor area had not been properly cleaned for months and dirt was ingrained into that rubberized floor area. Of the 8 showers most had no hot or cold labels eg red or blue markings.

I then walked around the whole centre. The gym was dirty with a build up of dust behind the equipment. The pool area was also dirty especially around the frog slide and the adjoining mats. The areas around the air conditioning and heating outlets were dirty indicating the ducts needed cleaning.

It was annoying to see a centre which had just had a $5 million extension and renovation being kept in such a poor condition.

On 21 July 2011, I arranged to meet the YMCA General Manager, Mal Healey and the Centre Manager and complained about the cleanliness of the centre. I showed photos I had taken of the men's change room and showers. We walked around the whole centre and I also drew attention to the hot and cold water taps with no tags and advised with so many young children using the showers this was dangerous.

After a week when there was no real change to the centre I ran the City Council Officer in charge and complain about the cleanliness. I asked how often he inspected the centre and he said once a month. I asked when he had last inspected the men's change rooms and showers and he said due to privacy reasons he never inspected this area. I asked why he did not inspect them when the centre was closed.

In frustration I then rang Councilor Noel Perry, Ben Taylor and John Phillips and asked them to inspect the centre and I expressed my concern at its condition. I personally met with Noel Perry one Saturday morning and showed him around the centre. John Philips rang back to advise that he had got in touch with the relevant Council Officer to try and get things fixed.

It was with some amazement that I and other users of the centre learnt later in the year that the YMCA had taken over the Eureka Pool from the McKenzie Family. Although it was an older facility the Mckenzie Family had been excellent operators for many years and it was maintained in an excellent condition. This was certainly in total contrast to how the BAC was maintained.

I spoke to regular users and some wanted to go straight to the press. I argued that it was more appropriate to go straight to Council and express our concerns. On behalf of a group of users I arranged a deputation with Councilor Fletcher and the CEO Anthony Schinck on 6 December 2011. At that meeting was Eric Braslis, the director of growth and development.

Deputation to Council 6 December 2011

We outlined in detail all events since the meeting with the YMCA on 21 July 2011 together with our concern about the general running of the BAG by the YMCA for many years as previously discussed. I produced the photos of the change rooms and showers which I had taken in July and I also now enclose some of those photos for your inspection.

There was also another reason why we wanted the deputation. That was, what we saw as a lack of financial control in respect to the collection of cash at the front counter. As a lawyer and business consultant I advised that theft was a major concern to any business or organization and that the YMCA and Council were at serious risk if it did not implement change. I gave advice which I will not ~o into now as to what needed to be done to improve their financial control. When you sell services you do not have the benefit of a stock take.

Viability of BAC

We then discussed the viability of BAC and the fact that a friend of mine who as an accountant acted for gymnasiums and swim schools in Melbourne and he had advised that they were very profitable if run well.

Eric Braslis advised the current agreement with the YMCA which expires in June 2012 was restrictive and any new agreement would allow better Council control. We advise that we were concerned about the terms and conditions of any new agreement and it was suggested and we agreed that we would be consulted when the agreement was drafted. Eric advised it was a big job and that it would take some time. I advised that of a commercial lawyer of 30 years I would be happy to check the terms and conditions and also check that it was so drafted that the Council has adequate powers to enforce the terms and conditions. It was definitely agreed that Eric Braslis was to get back to us.

At this point either Craig Fletcher or Anthony Schinck advised that it was important in this matter that Council have input from people like us who use the centre.

We left the meeting feeling the meeting has produced a good outcome and we were being given the opportunity to have some input as users of the centre into the terms and conditions of the proposed agreement. I believed at that stage that I had made the correct decision in coming directly to the Council to air our concerns.

It came as a complete shock when I read in The Courier that Council had let a tender to the YMCA for 10 years for a total value of $5.8 million dollars. I immediately arranged a meeting on Friday, 20 April 2012 with the Mayor Mark Harris and Anthony Schinck. I summarized what had happened at our meeting on 6 December 2011 and we expressed our concern that the agreement that we believe we had been reached on the 6th of December had been broken. Anthony Schinck agreed that Eric Braslis was definitely going to make contact with us but gave no explanation as to why it did not happen.

I also advised that I was concerned that we had gone to the trouble to come to the meeting on 6 December to raise matters about a lack of financial control. It was interesting to note that nearly four months later no changes had been made at the centre in respect to the financial controls that we had discussed. The suggestions that we had made had not been implemented and there had been no real change to the old system.

10 Year Term

I then raised my concern about the granting of a 10 year term. In my opinion the granting of a ten year agreement was the wrong thing to do. The advice to you is in my opinion poor, my opinion is endorsed by other experienced lawyers I have spoken to.

If you get a bad operator you are then locked into a ten year agreement. I advised that it takes away Councils control and flexibility to run the centre and that the ten year term is dangerous in that if there is a breach you are forced to go to court or mediation and this is costly and uncertain. A far better way is to have a term of say three years with two three year options exercisable at the discretion of the Council.The reality is that if the operator is no good you can get rid of them at the end of the first term and they know this. It keeps people honest and on their toes. I advised the meeting that I could not believe that any lawyer could have advised the Council to enter into a fixed ten year term.

I am extremely concerned to find out whether the Council Officers when dealing with a $5.8 million ten year agreement received legal advice in respect to all aspects of the agreement and in particular a ten year fixed term.

A prudent advisor would also have been mindful that BAC may during the ten years be expanded or altered. Customer needs change, activities wanted may change. This is a business that is being managed not just a building and it is critical that there be flexibility. A ten year term does not give this flexibility.

Failure to Advise of Deputation

At the meeting on 28 April 2011 with the Mayor and Anthony Schinck we expressed our concerns that the Councilors with the exception of Craig Fletcher who was at the deputation meeting on 6 December had not been informed of the deputation. The matters raised at the deputation were seriouand showed in our opinion a failure of the YMCA to properly manage the centre.sCouncilors should have been aware of this deputation and aware of the matters which were raised. When Councilors voted on the tender they had the right to be fully informed. The failure of Council officers to advised Councilors of our deputation is a serious matter and we believe should be investigated.

Council Briefings

Prior to my meeting with the Mayor on 20 April I had spoken to a number of councillors about the management agreement. To my surprise they did not appear to have a lot of knowledge of the exact terms and conditions except it was for ten years.

It is my belief and concern that the tender was advertised without Council approving the terms and conditions or being fully briefed prior to tenderering.

When Council had to vote on who should win the tender there may not have beendoes not seem to be a full briefing to councillors as to the terms and conditions. Council were basically locked into a tender agreement which had been advertised with little chance of changing the terms.The process does not seem right. Inspection of the Facility

At our meeting on 20 April I requested the Mayor and Anthony Schinck to visit BAC which we did that afternoon. In the men's showers 5 out of 8 showers did not

have either a hot or cold sticker. The overall cleanliness of the centre was poor. The area around the frog side was particularly dirty as were the mats and I said to the Mayor he should now have a better idea of why we had been so annoyed and why we had made the original deputation. Anthony Schinck also expressed his concerns in respect to the cleaning. He took photos and advised that he would be taking the matter of cleanliness up with the relevant Council Officer on the following Monday. Why had little or no action been taken after our deputation on 6 December?

Options

At the end of the existing contract with the YMCA the Council had a number of options. It could have decided as it did to enter into a management agreement. A second option which also should have been investigated was the option of running the pool by the Council. From investigations I have made a number of Melbourne Councils run their own pools and aquatic centres.

Just after our meeting with Anthony Schinck and Craig Fletcher on 6 December, I visited the brand new aquatic centre at Waurn Ponds Geelong which had just been completed at a cost of $30.5 Million.

Geelong Council runs its 6 aquatic sites, four indoor and 2 outdoor. The new facility at Waurn Ponds is outstanding. I spoke with the Manager who is in charge of all of the aquatic centres in Geelong and asked him why Geelong ran the pools themselves. He advised that in his opinion it meant that the Council had direct control over the facilities and therefore controlled community outcomes.

What was interesting was that in respect to the new facility at Waurn Ponds which is very similar to the BAC but only on a bigger scale I am advised the Council is running this at a break even point. This includes depreciation. It had been our intention if the meeting with Mr Eric Braslis had ever taken place to recommend that Council should investigate the running of BAC itself and that it should get advice from the City of Geelong in respect to the proposed running of the centre.

I am also aware that the city of Stonington in Melbourne also runs the Prahran pool and the Harold Holt Centre. I had spoken to a Councilor of the city and she advised that the reason that they ran the pools was that some years ago they had trouble with an operator. They had taken the pools over themselves and the main benefit was that they had absolute control.

My question to you is was this option fully investigated, which it should have been. I note that from the minutes of a People and Communities meeting on 14 October that Councilors discussed whether it was feasible for Council to run the aquatic centre BAS itself but officer lan Rossiter said financially it would prove unviable. The question which I and you would like answered is what investigations or research did Mr Rossiter conduct to make this statement.

One operator who has arrangements with 50 Councils Nationally advised that none of those arrangements adopted the Ballarat model.

10 Year Term

There was also considerable surprise at the Ballarat City Council granting a ten year term. I am advised that the majority of Council Management Agreements are usually of a limited period of three years or an option of three years. The only time where there maybe a longer term is where the operator has committed some millions of dollars for capital improvements.

As a lawyer I would have been very reluctant to advise any potential tenderer to eni into a fixed ten year term. It is too dangerous to predict so far In advance. I am advised by Anthony Schinck that Council officers recommended a ten year term to attract more tenders. It did not work as there were only two tenders.

Again in my opinion it was poor advice and has probably discouraged people putting tenders in. Again I ask did Council Officers seek good commercial legal advice in this matter. Did they check with the industry to find out what the industry norm was?

It is our request that Council investigate the following matters.

1. Councillors institute an inquiry into the tender process

a) Was Council briefed on the terms and conditions of the tender documents prior to its being advertised and did Councillors consent to the terms and conditions

b) When voting on the two tenders was there a briefing as to the terms and conditions of the management agreementincluding any profit share.

2. Council request details of all options explored by Council Officers in respect to the future running of BAC. In particular did Council Officers complete an investigation as to the viability of running the BAC itself and was any contact made with other Councils like Geelong to establish why they ran their own facilities and what benefits are obtained from doing so.

Council should ask Mr Ian Rossiter when he advised it would be unviable for Council to run the BAC itself to provide evidence as to how he came to this conclusion.

When only two tenders were lodged did the Council Officers revisit the running of the BAC by the Council itselfas a result of the financial figures in those tenders.

3. Why when a deputation was received on 6 December by Anthony Schinck regarding concerns about the running of BAC by the YMCA was this not conveyed to Councillors prior to them voting on the tender.

4. Why undertakings made to the deputation on 6 December were not subsequently honoured.

5. Did a lawyer advise on the terms and conditions of the tender documents and agreements including any advise on the ten year fixed term.

6. When only two tenders were received did Council Officers make any enquiries from any of the main operators in the industry to establish why they had not tendered.

7. Did Council Officers question whether the terms and conditions in particular the 10 year fixed term may have discouraged potential tenders.

8. Was any consideration given to re-tendering with different terms and conditions.

9. Council Officers recommended a 10 year fixed term as this would attract more tenders. On what evidence was this based?and did Council Officers consult with the main industry operators to confirm this.

10. With only two tenders what investigation was made by Council Officers to establish whether the YCMA tender was fair and reasonable and did Council Officers make any contact with and other Councils with similar facilities to get any comparisons.

Council should refrain from signing any agreement with the YMCA until the enquiry is complete.

Council should get advice on the possible re-tendering of the BAC.

If Council proceeds with an agreement with the YMCA it should endeavor to renegotiate the terms of the agreement back to a three year with a three year option at the discretion of the Council which is in line with other current agreements in other similar centres.

Agreement and Legal Advice

1 have read the management agreement which was contained in the tender documents and have shown it to an experienced lawyer. It is our opinion that the contract is not commercially adequate to protect the Council's interest and it may be difficult to enforce the terms of the contract. We would strongly advise that Council engage a specialist commercial lawyer to review and advise on the contract.

Conclusion

It is our belief that Council Officers have failed to give or get sound commercial advice to Council. The Council model and terms and conditions of the management agreement have we believe resulted in poor industry response resulting in a lack of competition and an annual fee that could have been lower if there had been strong competition.

Yours Faithfully,

Peter Byrne