The AFMA Observer Program: consideration of market testing

December 2013 Prepared by Charlene Trestrail

2

Acronyms ABARES Australian Bureau of Agricultural Resource Economics and Sciences

AFMA Australian Fisheries Management Authority

CCAMLR Convention for the Conservation of Antarctic Marine Living Resources

CCSBT Commission for the Conservation of Southern Bluefin Tuna

CSIRO Commonwealth Scientific and Industrial Research Organisation

E-monitoring Electronic monitoring

EPBC Act The Environment Protection and Biodiversity Conservation Act 1999

FTE Full-time staff equivalent

GVP Gross value of production

HR Human Resources

ISMP Integrated Scientific Monitoring Program

MAC Management Advisory Committee

OBIS An AFMA cost centre involved in the allocation of observer program costs

OBOF An AFMA cost centre involved in the allocation of observer program costs

RAG Resource Assessment Group

RFMO Regional Fishery Management Organisation

SEWPaC Department of Sustainability, Environment, Water, Population and

Communities

TEP species Threatened, endangered and protected species; listed under the

Environment Protection and Biodiversity Conservation Act 1999

3

Contents Acronyms .................................................................................................................................... 2

Contents ....................................................................................................................................... 3

Summary ..................................................................................................................................... 4

Introduction ................................................................................................................................. 5

Section 1: The Program in the current context ............................................................................ 7

1.1 Developments which can influence the Program .............................................................. 8

1.2 Drivers for market testing.................................................................................................. 9

Section 2: Details of the Program.............................................................................................. 11

2.1 Objective and outputs ...................................................................................................... 11

2.2 Program structure and responsibilities ............................................................................ 12

2.3 Staffing arrangements...................................................................................................... 17

2.4 Costs ................................................................................................................................ 18

Section 3: Alternative observer service delivery models .......................................................... 22

3.1 Service delivery options .................................................................................................. 22

3.2 Risks of outsourcing ........................................................................................................ 32

Section 4: Recommendations .................................................................................................... 37

Appendix A: History of changes to the Program ...................................................................... 38

Appendix B: Program roles in each fishery .............................................................................. 39

Appendix C: Individuals and organisations contacted .............................................................. 43

Appendix D: Extract of Hansard ............................................................................................... 45

References ................................................................................................................................. 49

4

Summary The in-house fishery observer program (the Program) delivered by the Australian Fisheries Management Authority (AFMA) collects the independent fishery data used to support fisheries management decisions. In addition, the Program produces intangible outputs: operational information that enhances the functions of other AFMA sections, a communication channel between AFMA and vessel operators, and stronger government-industry relationships. The Program is well integrated with the functions of other AFMA sections, and has a strong reputation with AFMA staff and external stakeholders. As part of its commitment to cost efficient fisheries management, AFMA is considering whether to market test the administration and observer components of the Program to assess whether external companies can deliver these services more efficiently and cost-effectively than in-house arrangements. Several forums have called on AFMA to explore external provision, and during Senate Estimates in 2012 the AFMA Chief Executive Officer expressed a willingness to adopt externally provided observer services if they prove more cost effective and efficient. Outsourced components are a feature of several international fishery observer programs. Such arrangements are claimed to deliver more cost effective services, but there are associated risks. A common theme that emerged from consultation with AFMA staff is the concern that external providers may not be able to collect the quality data currently delivered by the Program, and the downgrading (or loss) of the intangible outputs described earlier. This report recommends that:

1. This report be used as the key source of information on the AFMA observer program if a decision is made to market test the program. Other reliable sources of information may also be used;

2. Should market testing go ahead, the Evaluation Panel needs to be well informed of the issues identified in the report by the Steering Committee when assessing applications for market testing;

3. Should market testing proceed the current Steering Committee be reformed as an internal Reference Group;

4. The Reference Group’s duties include providing support and/or advice to any market testing process; and

5. The Reference Group work closely with the Evaluation Panel to draft the criteria for market testing noting that getting the criteria right is critical and that their development should be carefully considered.

5

Introduction The AFMA Observer Program (the Program) ‘provides fisheries managers, research organisations, environmental agencies, the fishing industry and the wider community with independent, reliable, verified and accurate information on the fishing catch, effort and practice of a wide range of boats operating inside, and periodically outside, the Australian Fishing Zone’ (Australian Fisheries Management Authority [AFMA] n.d., para. 1). The data collected by the Program forms an integral part of monitoring fisheries and evaluating the environmental impacts of fishing practices. The data enables AFMA to meet its legislative objectives: the development of stock assessments and bycatch risk management strategies, satisfying threat abatement plans under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), and meeting international reporting obligations for Regional Fisheries Management Organisations (RFMOs) which regulate high seas fishing. The Program is cost recovered from industry and can be a sizeable component of a fishing business’s overall budget. AFMA has previously researched the capabilities that exist for observer services within the market (referred to in this document as market testing) to ensure the Program is the most cost effective and efficient service available. In 2008, the Cost Efficiency Working Group recommended AFMA again consider the feasibility of alternative approaches to observer coverage, including using external service providers (AFMA, 2008, p.5). This view is supported by the Review of Commonwealth Fisheries, which called on AFMA to examine opening its observer services to competition (Borthwick, 2013, p. 72). During Senate Estimates in 2012, the AFMA Chief Executive Officer expressed a willingness to adopt externally provided observer services if they prove more cost effective and efficient than the current in-house service provision1. In light of these factors, AFMA is considering whether to again market test the Program and gauge suppliers’ level of interest in providing observer services to Commonwealth fisheries. This report has been produced to inform the Chief Executive Officer’s decision regarding whether or not to proceed with market testing. Drawing on a range of sources, including consultation with AFMA staff, this document collates current information about:

• The existing Program's function, management and costs;

• Preliminary considerations for alternative observer service delivery models, drawing on international examples; and

• The potential benefits and risks of market testing and outsourcing. 1 The AFMA Chief Executive Officer said “If we can get that data [for evidence-based decision making] more cheaply and more effectively, then we will do so… we have tested our observers a number of times in the market place and they have performed reasonably well on four occasions. We are happy to go and have a look again” (Commonwealth of Australia, 2012, p.18). The relevant extract of Hansard is provided in Appendix D.

6

This report does not evaluate the current Program’s objectives, funding arrangements or coverage levels. Analysing the efficacy of these elements of the Program is beyond the scope of this report, but has been assessed in previous reviews (Centre for Regional Economic Analysis, 1995; ACIL Consulting, 1998; Williams, 2008). It is also outside the scope of this document to suggest an alternative observer service delivery model for AFMA-managed fisheries. Instead, this report collates information to support a decision about whether or not to proceed with market testing.

7

Section 1: The Program in the current context This section provides an overview of the current context in which the Program operates. It explores how the Program contributes to AFMA’s objectives and legislative requirements, the factors which may influence the Program in the future, and the drivers behind the consideration of market testing.

In general, the Program contributes to the cost effective management of uncertainty in fisheries. AFMA manages fisheries by considering the trade-off between costs and risks (as described by Sainsbury, 2005. See Figure 1), both of which are influeneced by data collection. As data collection increases so too do the management costs required to fund it, but the larger amounts of data facilitate more informed fishery management decisions and so reduces the risk associated with harvesting.

Figure 1 Cost effective management of uncertainty in fisheries.

Source: Sainsbury, 2005, p.12. AFMA-managed fisheries are subject to stringent data collection requirements that collectively form a monitoring program; the program regularly collects data and information to support the implementation of management strategies. Whilst the specific data needs vary between fisheries, monitoring programs are generally designed to record and measure:

• Which species are being caught, and how much; • How, when and where species are caught; and • Which habitat and ecosystems are being impacted by the fishing activity.

8

Primarily, AFMA’s monitoring program collects the required data through self-reported fishery logbooks and catch disposal records. Due to the potential for misreporting, logbook data must be independently validated to generate the confidence necessary to inform decision-making. This is achieved by using on-board observers, whose work verifies and adjusts the reported or recorded catch to reflect the real catch taken at sea.

Specific observer programs operate in 15 fisheries and high seas fishing to collect, store and disseminate data related to fisheries catch, effort and practices on commercial fishing vessels (details provided in Appendix B).

Data collected through the Program facilitates a range of fishery management decisions and demonstrates AFMA’s commitment to ecologically sustainable fishing. The data assist AFMA to address the Ministerial Direction delivered in 2005, which seeks to reduce overfishing and manage the broader ecological impacts of fishing practices (Commonwealth of Australia, 2005). Specifically, observer data is a key component of target species’ stock assessments and rebuilding strategies required under the Harvest Strategy Policy. Program data also informs the development of Management Strategies, bycatch and discard work plans, which mitigate fishing impacts on the broader marine environment. The Threat Abatement Plan for the Incidental Catch (or bycatch) of Seabirds During Oceanic Longline Fishing Operations, which was established under the EPBC Act, also requires Program data. Finally, data collected by the Program enables AFMA to meet its reporting requirements for RFMOs.

1.1 Developments which can influence the Program The Program does not have a formal, long-term plan. However, the increased interest in Threatened, Endangered and Protected (TEP) species interactions with fishing activities, and the trend of shrinking government resources, suggest that the Program may be required to deliver more data using a similar (or smaller) budget in the future.

The Program, and monitoring in general, is operating against the backdrop of evolving expectations for fisheries management. The Review of Commonwealth Fisheries suggests that, where practical and in areas of highest risk, the use of observers or video monitoring surveillance should increase (Borthwick, 2013, p. 64). The recently completed Harvest Strategy and Bycatch Policy Reviews may also impact AFMA’s function, with one possibility being increased requirements for data relating to bycatch and TEP species interactions. However, it is not yet known which recommendations identified by these reviews will be adopted by the broader Government in developing new policies and consequently, the full implications for AFMA and the Program.

It is unclear how the Program will be influenced by developments in electronic monitoring (e-monitoring). E-monitoring is a potential alternative to conventional observer coverage for collecting independent fishery data. AFMA has introduced electronic monitoring in the Gillnet, Hook and Trap sector of the Southern and Eastern Scalefish and Shark Fishery, and is intending to implement the technology in the Eastern Tuna and Billfish Fishery (AFMA, 2011). The technology cannot entirely replace physical observers because it cannot collect biological samples which may be required (AFMA, 2011), but it will likely alter observers’ coverage

9

levels and the skills required to perform their job. For example, land-based staff will need the skills to interpret video data. A supplier of electronic services has been selected to supply equipment and analyse recorded footage, and AFMA is currently developing a formal plan to introduce electronic monitoring in other fisheries.

1.2 Drivers for market testing The Program is almost entirely funded by concession owner levies2. The Program’s cost has long been an area of concern (described in 1998 by ACIL Consulting) as the levies can be a sizeable component of the overall fishing business budget: the Program represents up to 25 per cent of the levy across many fisheries. Industry’s concerns were noted in the recent Review of Commonwealth Fisheries (Borthwick, 2013, p. 72). The Commonwealth Fisheries Association was asked to comment on industry perceptions of the Program in March 2013, but has not done so at this stage.

Other drivers for market testing include calls for enhanced cost efficiency from several sources:

• The Cost Efficiency Working Group3 – the Group recommended that AFMA consider alternative approaches to observer coverage, including the use of electronic monitoring and external providers (AFMA, 2008, p.5);

• Senate Estimates – The Program’s cost, and options for external provision of observer services, was closely queried in 2012 by Senator Colbeck (Commonwealth of Australia, 2012, pp. 17-22); and

• The Review of Commonwealth Fisheries – this much publicised review of fisheries legislation, policy and management suggests “Opening up AFMA to competition in the area of observers, for instance, should also be examined” (Borthwick, 2013, p. 72).

The Program has previously been market tested. Industry concerns regarding Program cost prompted AFMA to request tenders in 1999. Following the tender process, AFMA decided to retain the Program in-house (MRAG Americas Inc, 2000, p. 25). Details surrounding this decision are unknown as the tenders and internal evaluation documents have been destroyed in accordance with record keeping guidelines.

In 2003, AFMA requested tenders for the provision of observer services for the period January 2004 –December 2006 through a government-contractor model. Three tenders were received; AFMA did not submit a competing tender, but sought to compare tenders against its current standards. The evaluation panel concluded that two tenders had the necessary technical capabilities to deliver observer services, but no tender could compete with AFMA’s

2 The exception is the Torres Strait Prawn Fishery, for which government covers 20 per cent of the Program’s cost. 3 Cost Efficiency Working Group members are industry representatives, AFMA employees, and independents.

10

service delivery costs4. The service was retained in-house, but a following review of cost recovery for fisheries management and a review of AFMA overheads applicable to observer services resulted in reduced cost of observer services to industry (AFMA, 2004, p. 119).

As part of co-management arrangements, the Northern Prawn Fishery undertook a tender process in 2012 for outsourcing observer services, data entry and validation in that fishery. The AFMA delegate decided to retain observer services for this fishery in-house, because it was more cost effective to do so. However, this tender process did not prove or disprove whether outsourcing is more cost effective for the entire Program.

4 The AFMA baseline costs did not include overheads that were determined to be irrelevant or costs for services that would be retained by AFMA.

11

Section 2: Details of the Program This section presents information about the Program’s structure, function and costs to provide an understanding of how the Program currently operates. This report does not seek to evaluate the efficacy of the Program’s operations, which have been the focus of previous reviews (Centre for Regional Economic Analysis, 1995; ACIL Consulting, 1998; Williams, 2008).

2.1 Objective and outputs The Program aims to collect reliable, independent and high quality fishing and biological data to support assessments that cannot be obtained via other means, such as logbooks. The data objectives vary between fisheries and over time. Data needs are largely driven by the legislative objectives, fisheries policy and management arrangements, which are assessed by the Resource Assessment Groups (RAGs), Management Advisory Committees (MACs) and AFMA managers. Appendix B provides a breakdown of observer services provided in each fishery in 2011-2012.

The Program delivers four direct and indirect (or intangible) outputs:

1. Fisheries data. The Program meets its objective by delivering independent and timely biological, catch and effort data, which verifies logbook data and catch disposal records. The data collected through the Program informs stock assessments and subsequent catch limits, reporting on TEP species interactions, and international reporting obligations to RFMOs. The data collected varies according to each fishery’s needs, and is detailed in Appendix B.

2. Enhanced operational information5. Whilst observers’ primary role is fisheries data collection, they also observe and record operational information, which feeds into other AFMA activities. Examples of this include: • Recording operational information associated with the vessel and crew that aids and

supports AFMA’s compliance risk assessment process; • Enhancing the safety of AFMA personnel who board vessels by reporting potential on-

board safety hazards; and • Facilitating estimates of logbook misreporting through the ‘observer effect’6.

3. Communication channel. AFMA observers are a communication channel between

government and industry, and facilitate the distribution of information (such as identification manuals, and updates on fishery and environmental issues) to vessel

5 Operational information encompasses a wide range of information, including: at-sea living conditions, the presence and location of firearms on vessels, and breaches of AFMA legislation and the EPBC Act. 6 The ‘observer effect’ refers to fishers changing their normal fishing practises, location and reporting as a consequence of having an observer on-board. Comparisons of logbook entries from observed and unobserved fishing trips enable AFMA to estimate levels of logbook misreporting.

12

operators. AFMA predominantly communicates with concession holders whereas observers’ work with vessel crew which assists in disseminating information further down the line. Communication also occurs in the reverse direction, as occasionally fishers contact Program staff to inform government of other vessels’ compliance transgressions. Observers also facilitate information flow between AFMA and the scientific community, which sometimes includes conservation non-government organisations. Conservation organisations occasionally contact observers to seek advice about bycatch mitigation technology, and observers keep AFMA managers informed about new technology trials they see run by other groups to keep fishery managers abreast of new developments.

4. Government - industry relationship building. AFMA observers act as ‘the face of government’ as they are often the only government representatives that vessel crews and/or owners have contact with. A previous review (Williams, 2008, p. 6) highlighted that this situation can raise AFMA’s profile with industry. Whilst this is perhaps the least tangible of the Program’s outputs, the benefit of government officials interacting with industry, and the maintenance of such relationships, should not be overlooked.

Occasionally, outputs 2, 3 and 4 occur in tandem. The observer administration team advised that some operators prefer to report other fishers’ compliance violations to them, rather than to AFMA Compliance staff. In this case, the relationship between fishers and Program staff makes fishers feel comfortable using this communication channel to provide operational information to AFMA.

The Program’s outputs are the product of years of effort and relationship building. Program staff have worked hard to increase vessel operators’ acceptance of on-board observers, and operational information outputs in particular are the result of a long-term process to build relationships between observers and AFMA Intelligence staff.

Indirect outputs are often overlooked because they are challenging (sometimes impossible) to quantify, but they undeniably have value. The difficulty lies in achieving consensus about the significance of these indirect outputs, as significance reflects value judgments and thus will vary between individuals.

2.2 Program structure and responsibilities To meet its objective, the Program integrates data collection, storage, retrieval, and archiving. This requires the cooperation and coordination of several elements within the Program. The roles of each element are summarised in Table 1.

13

Table 1 Responsibilities of Program elements. Program elements Responsibilities RAGS, MACs and fishery managers7

• Determine data requirements for each fishery, which are then fulfilled by the Program and other data collection processes.

Administration • Coordinate logistics of observer deployment, including pre-trip briefing, transport, accommodation and equipment.

• Monitor observer location and safety. This includes having one administration staff member on-call at all times.

• Arrange training sessions (including first aid and sea safety) and develop Observer procedure manuals.

• Manage paperwork for observer pay and reimbursements. • Perform data quality checks with Data Entry staff. • Check and distribute observer reports; create progress reports for RAGs

and MACs. • Calculate fee-for-service invoices for fishers. • Conduct post-deployment debriefing sessions with observers.

Observers • On-board observers and port-based samplers record data and collect biological samples.

• Act as communication channels between government and vessel operators, and between AFMA and the scientific community.

• Produce observer reports, provide AFMA with fisheries data and enhanced operational information.

• Work with outsourced data collection officers in the sub-Antarctic fisheries.

• Design and implement at-sea research projects with external agencies.

• Provide in-house training to new observers. Data Entry (currently contracted to D&S Datafix)

• Input paper-based observer data into the database. • Perform data quality checks in conjunction with Administration

Data Management • Conduct some analyses on observer data, and distribute data to other organisations (e.g. CSIRO) for advanced analyses.

• Distribute data for ad hoc requests from AFMA staff. • Maintain databases and manage any changes or upgrades to the

storage system.

The network in Figure 2 depicts the interactions that occur between Program elements, and between the Program and other AFMA sections. These interactions enable the Program to set and achieve data goals, and deliver outputs to stakeholders.

7 This element is not part of the Program per se, but is included here to provide a more thorough understanding the responsibilities that influence the Program.

14

Yearly, the data requirements for each fishery are determined by the relevant stakeholders, including the RAGs, MACs, fishery managers and in some fisheries (such as the Southern Bluefin Tuna Fishery), RFMOs. An administration staff member advised that fishery managers often seek advice from the administration team on setting data requirements. In this way, the Program is individually tailored to each fishery’s needs (see Appendix B for details of observer services provided to each fishery in 2011-2012).

The administration team coordinates the deployment of at-sea or port-based observers throughout the year to gather the required data. This involves several responsibilities, including training, equipment provision, and the logistics of getting observers to ports. The location and safety of deployed observers is constantly monitored, and an administration staff member is on call at all times in case of emergencies. The administration team also manages the paperwork for observers’ pay and reimbursements, and calculates invoices for fisheries where observer services are paid for through fee-for-service arrangements (see 2.4 Costs).

At-sea and port-based observers collect the required biological and TEP species interaction data, and a range of operational information that is utilised by other AFMA sections. Observers’ roles are very demanding; they may be required to travel long distances to remote regions, they often spend extended periods away at sea, and they must live and work with vessel crew who may not support their presence. Observers submit their reports and data to the administration team, and participate in post-deployment debrief sessions to discuss feedback.

In addition to the standard data collected for monitoring, observers work with external research organisations, such as universities, to design and conduct at-sea research projects. These projects are run through separate agencies, but align with AFMA priorities and can include topics such as the effectiveness of bycatch mitigation technologies.

The administration team performs quality control checks on observer data, to identify and rectify errors. In addition to the regular data progress reports supplied to RAGs, MACs and fishery managers, the observer reports written after every trip provide a snapshot of fishing activities as they occur in real time. The administration team brings particularly important data to the attention of fishery managers and Intelligence staff as it arrives. This includes, for example, if a fishery is approaching a bycatch limit for a particular species or the presence of weapons on a vessel. Data entry staff input observer data into the database, and interact with administration to ensure data quality. The information management that occurs at this stage is key to achieving the Program’s objective of delivering high quality, timely data.

The data management team maintains the database, and manages any changes or upgrades, which ensures that the large amounts of stored data can be utilized effectively. Additionally, the data management team conducts some data analyses (complex models are completed by other organisations, such as CSIRO and ABARES) and disseminates data for ad hoc requests within AFMA. A slight variation of responsibilities occurs in the sub-Antarctic fisheries, where data is managed by the Australian Antarctic Division and delivered to AFMA, who then

15

reports to the Convention for the Conservation of Antarctic Marine Living Resources (CCAMLR).

One fishery manager advised that the current Program enables RAGs to easily contact observers and obtain ad hoc information. This is valuable in assisting RAGs and fishery managers to understand reasons underlying unusual data patterns. Further, being able to contact observers and ask them to note emerging issues on their upcoming deployment assists AFMA managers to keep abreast of developments.

2.2.1 Outsourced elements AFMA controls all elements of the Program, with the delivery of some responsibilities contracted to external companies. Currently, AFMA:

1. Contracts the external business D&S Datafix to provide data entry staff. The D&S Datafix employees operate from AFMA’s Canberra office, and have delivered data entry services for AFMA for 25 years; and

2. Accredits external ‘data collection agencies’ to work alongside AFMA observers in the

sub-Antarctic fisheries. This situation was developed to address industry’s concern about the cost of using AFMA observers to satisfy the CCAMLR requirement of 100% observer coverage using two on-board observers. Currently, AFMA has accredited two international companies, and would consider accrediting more if requested by industry. Accredited companies are contracted by the vessel operators, and their staff work as ‘data collection officers’ under the direction and supervision of an AFMA observer. The roles of the AFMA observer and the data collection officer are clearly delineated.

Accredited data collection companies are carefully managed to avoid conflicts of interest. AFMA prefers that no company directors or employees have been employed by a fishing company, and any previous affiliations with fishing companies must be declared. Staff must not be associated with any functions of a fishing company for a period of 12 months prior to employment as an observer. In addition, there are severe penalties for non-compliance. If a data collection officer fails in their obligations, or if there were to be any improper dealings, the contracted agency would be de-accredited and the fishing company permanently loses its access to the fishery (MRAG Americas Inc, 2000, p.25).

16

Legend A RAGs, MACs and fishery managers determine the data requirements for each fishery. B Administration manages all aspects of observer recruitment and deployment. C At-sea and port-based observers collect the required data, and deliver observer reports to

administration. Debriefing sessions between observers and administration enable feedback communication.

D Administration accredits private companies (‘data collection agencies’) to collect data in sub-Antarctic fisheries.

E Observers from data collection agencies work on the same boats as AFMA observers in sub-Antarctic fisheries, but roles are clearly delineated.

F Data quality is assessed by administration, and entered into the database by data entry staff. Communication continues between the teams to ensure data quality.

G Data management maintains the database and perform some analyses on observer data. More complex analyses are performed by external organisations, including CSIRO and ABARES.

H Data management disseminate data for fishery managers’ ad hoc requests. I Administration communicates operational information from observer reports to AFMA

Compliance. J Administration alerts fishery and environment managers to relevant observer data as it

arrives. K RAGs, MACs and fishery managers can contact observers to clarify reasons behind unusual

data patterns and to obtain information on emerging issues on vessels.

Figure 2 Network of interactions between elements of the Program (depicted in squares) and AFMA sections (shown in circles). Arrows indicate the direction of communication and/or activities.

17

2.3 Staffing arrangements As of May 2013, 30 staff across four different AFMA sections were involved in the Program’s operations (Table 2). However, the number of observers and data entry staff varies throughout the year depending on the workload, and so it may sometimes be more useful to consider the full-time staff equivalent (FTE). Approximate FTEs for each Program element are provided, but should be interpreted with caution: a) Observer FTE includes both sea days and land days, and so does not reflect the length of

time observers are deployed on boats; b) Fortnightly hours worked by data entry staff fluctuates depending on the work load, and

so this element’s FTE will also fluctuate; and c) The data management FTE cannot be entirely attributed to the Program as this team

manage work other than Program data.

Administration and data management staff have on-going employment, and observers are employed on non-ongoing (casual and intermittent) contracts. The business D&S Datafix is contracted by AFMA until June 2015 to supply data entry and related services. Observers are the only element of the Program that is not located at AFMA’s Canberra office. Table 2 Program staffing arrangements as of May 2013. Program element

Number of staff

Approximate FTE Employment type Location

Administration 6 5.3 On-going Canberra Observers 19* 11 Non-ongoing Contract Field-

based Data entry8 2* 1.2

(approximately 86 hours per fortnight)

Part-time, contracted from the external business D&S Datafix

Canberra

Data management

3 2.7 On-going Canberra

Note: Each element’s duties are detailed in Table 1. Asterisks indicate variable staff numbers.

2.3.1 Staff retention and skills Administration staff advised that the Program currently has high staff retention rates. This is an improvement on the low retention rates which affected the Program in 2008 and which could have been due to the difficult nature of observers’ work (Williams, 2008, p. 8). Administration staff advised that observers who have left the Program in recent years gain employment in higher qualified jobs, suggesting that Program observers have obtained skills that are desirable elsewhere in the Australian workforce.

8 These are not AFMA staff, but are included here to provide a complete picture of the Program. Note that the data entry team consists of several staff members: two staff work on observer-collected data, and other staff that manage different data, such as logbooks and catch disposal records.

18

High staff retention increases the Program’s capacity to achieve its objective. Experienced observers collect consistent and high quality data (Office of Inspections and Program Evaluations [OIPE], 2004, p.19), and can provide stakeholders with confidence in the data integrity. Experienced observers also deliver services more proficiently than new observers because they are familiar with the difficulties of sea-time, create fewer safety concerns for vessel crews, and are more certain in assessing compliance issues (OIPE, 2004, p.19). With relevant training, experience and support, new observers can also deliver high quality services, but staff retention reduces the frequency, intensity and costs of training needed. Observers require strong interpersonal skills to deal with the challenges of living onboard vessels, sometimes with crew who may not support their presence. Observers must also work in uncomfortable conditions involving long travel times, working in extreme weather conditions and in remote locations where accommodation and travel options may be limited. High staff retention can mitigate these difficulties as it enables familiarity and relationship-building between observers and vessel operators. A strong theme that emerged from communication with many AFMA staff is the dedication of AFMA observers to their roles which extends beyond the commitment to collecting quality data. For example, one observer provided first aid to injured crew, another shared his practical knowledge to assist a fisher to build his own bycatch mitigation equipment. An external report (Marine Resources Assessment Group [MRAG] 2006, p.47) notes that there is a high level of industry respect for AFMA observers’ professionalism and quality of work.

2.3.2 A commitment to improvement A culture of improvement exists within the current Program, most notably demonstrated by post-deployment debriefing sessions. These debriefings provide a forum for feedback about the success of the trip or topics of concern. In the sub-Antarctic fisheries, debriefing sessions are particularly extensive and involve AFMA observers and Compliance staff, and members of the Australian Antarctic Division. This is followed by a debrief with the vessel operator to discuss improvements on issues such as workplace health and safety. Debriefing sessions contribute to the success of observer programs and are considered to be an integral part of international programs (MRAG Americas Inc, 2000, p. 76). Debriefing sessions provide a forum to evaluate data collection methods and the work of each observer, determine the quality of data, identify problems and instill a sense of pride in a job well done.

2.4 Costs Historically, government has contributed up to 20 per cent of the costs of the Program. Today, under the latest AFMA Cost Recovery Impact Statement (AFMA, 2010), the Program is wholly funded by industry, except in the Torres Strait Prawn Fishery, for which government contributes 20 per cent of the cost. Most Commonwealth fisheries pay for observer services through an industry levy base. The exception is three fisheries (Heard and McDonald Island,

19

Macquarie Island and the Eastern Tuna and Billfish Fishery9), where observer services are paid for partly through the levy base and partly through fee-for-service arrangements.

A fixed sea day model is used to determine the exact coverage period (driven by data needs) in advance of observer deployment, and vessels are then levied accordingly. The base cost (which includes salaries, training, equipment, and observers’ at sea allowance) is combined with overheads, and the cost is then divided equally amongst the number of sea days. The Program plans to deliver 2465 sea days in 2013 – 2014 (a breakdown of sea days per fishery is provided in Table 8, page 39).

The Program’s final budget for the financial year 2013 – 2014 is approximately $3.502 million. The total includes the cost of the Administration team, observers and data entry staff (D&S Datafix). The Program budget is split between direct costs and administration costs. The direct costs are those attributed to cost centre OBOF and OBIS, and includes salaries, allowances and some incidental expenditure. Overheads are then applied to these two cost centres, however a discount is applied because observers take up no physical space in the Canberra building (no type C overheads are applied) and receive a 50 per cent discount for information technology, human resources and accounting functions (type B overheads). The Administration function is captured in OBOA and includes training, travel, administration salaries and wages. Full overheads are applied to this function (Table 3). The costs for these Cost Centres are then disbursed based on sea days as a cost driver.

Note that there is a slight difference between the total Program budget of $3.502 and that presented in Table 3. This is because AFMA undertakes Observer activities for the Torres Strait which is 80 per cent cost recovered from industry and 20 per cent funded by Government. This arrangement reduces the total amount AFMA cost recovers from the Torres Strait and therefore the total amount cost recovered by the whole Program from $3.517m to $3.502m. This arrangement is not present in any other Fishery and the Observer function is wholly cost recovered.

The direct sea day costs for observers are captured in the FinanceOne Budget. However all indirect costs and administration costs are not, they are simply averaged out across all Fisheries dependent on total Sea Days.

Using the final budget for 2013 – 2014 and the estimated 2456 sea days, the Observer Program costs $1589 per sea day and this is separated into:

$1064 for direct costs and associated overheads; and

$465 for administration and associated overheads.

9 For boats fishing in the Southern Bluefin Tuna zone during winter.

20

Table 3 Program final budget for the financial year 2013 – 2014.

Cost Centre Description Base ($)

Overheads ($) Total ($)

Type A Type B Type C Type D OBIS Observers - ISMP Field 695,215 75,050 102,234 0 21,958 894,458 OBOF Observers - Field 1,200,320 129,577 209,167 0 37,911 1,576,977 OBOA Observers - Administration 670,697 72,403 210,359 71,261 21,183 1,045,906 Total 2,566,234 277,031 521,760 71,261 81,053 3,517,342

The large number of Program staff and the direct budget means the Program attracts large overheads ($951 108). Overheads are divided into four categories, and represent the cost of management, corporate activities and facilities (Table 4). Table 4 Description of overhead types and allocation methods.

Overhead What the overhead pays for Allocation

A Senior staff time, including: the Chief Executive Officer; General Manager of Corporate Services; legal and policy staff; the AFMA Commission secretariat.

Based on direct budget expenditure for the financial year.

B Information technology application and operations; financial management; risk management and property services; human resources; training; long-term leave.

Based on full time equivalents staff members in the financial year.

C Canberra accommodation and facilities. Based on Canberra full time equivalent staff members in the financial year.

D Staff time of the AFMA Commission, the General Manager of Fisheries and the General Manager of Operations.

Based on direct budget expenditure for the financial year.

Importantly, the introduction of e-monitoring (described in 1.1 Developments which can influence the Program) will affect the Program’s cost as it reduces the number of sea days allocated to physical observers. This in turn reduces administrative costs and potentially observer staff numbers. Therefore, the draft costs presented here do not necessarily indicate what the Program may cost in the future.

21

Providing services to remote geographical locations is seldom cheap. However, the Program’s costs can be difficult to explain to industry and may seem excessive compared to external providers in the absence of like-for-like comparisons.

The internal budgeting process can make it difficult to identify the costs associated with running the Program. In the last two financial years AFMA has over-projected the costs of running the Program to the extent of approximately $200 000. Budgeting the expected costs and allocated administration down to this fine level could provide greater costing accuracy and may be useful if the Program is market tested with external providers. Ways of achieving greater accuracy should be investigated in the future.

22

Section 3: Alternative observer service delivery models This section critically reviews alternative observer service delivery models, and assesses the risks of outsourcing the administration and observer components of the Program. The data entry team is already outsourced, and AFMA is not considering the possibility of outsourcing the functions of the data management team. Therefore, these teams are not discussed in this section. Whilst this report provides the strengths and weaknesses of potential outsourcing options, it does not aim to provide an observer services delivery model tailored to Australian fisheries.

3.1 Service delivery options Globally, there is a range of observer service delivery models. In general, they fall into the following categories (MRAG Americas Inc, 2000, p. 56):

• Government program – Government is responsible for delivering all aspects of the program;

• Government-contractor model – Company(ies) directly contracted by Government are responsible for some or all elements of the program; and

• Third party contracting – One or more government-certified companies are contracted directly by vessel operators to fulfill certain observer requirements.

The current Program combines the three categories; it is predominantly a government program, has established a government-contractor model with the data entry team, and third party contracting of external ‘data collection agencies’ in the sub-Antarctic fisheries. Table 5 lists the potential benefits and costs for each service delivery model. One option is not necessarily superior to another, rather, one option may better suit the Australian context and AFMA objectives. Table 5 Potential benefits and costs of different observer service delivery models. Sources: MRAG Americas Inc, 2000; Davies & Reynolds (eds.) 2003; consultation with AFMA staff. Service delivery model

Benefits Cost

Government program

• Least likely model to have perceived conflict of interest.

• AFMA maintains complete control over the Program.

• Retains skills and expertise within government.

• Full integration with AFMA’s fisheries management, science and compliance elements.

• Personnel have a close relationship with broader fishery issues.

• No market pressure to improve efficiency and quality.

• Does not address ongoing industry concern regarding the Program’s cost.

• Does not address issues raised by the Cost Efficiency Working Group, Senate Estimates enquiries, and the Review of Commonwealth Fisheries.

• The net effect of all government procedures can lead to

23

Service delivery model

Benefits Cost

• AFMA can ensure high levels of observer support.

• Maintains existing government-industry relationships.

• Allows cost sharing of personnel and equipment.

• Can quickly alter coverage levels to address emerging issues.

inefficiencies.

Government-contractor model

• Market competition can drive more rapid cost efficiencies.

• External providers could potentially deliver higher standards compared to current Program.

• Faster, integrated access to new monitoring technology.

• Wider links to expertise through marketplace associations.

• External companies may be better able to respond to fluctuating data and labour requirements.

• Partial integration with AFMA’s fisheries management, science and compliance elements.

• Program may not be constrained by government procedures (e.g. for recruitment).

• Contract between the two parties allows AFMA to directly oversee the company’s performance.

• Possible loss of indirect outputs delivered by in-house service (described on page 11).

• External providers could potentially deliver lower standards compared to current Program.

• AFMA’s ability to alter coverage levels at short notice may be hindered by the process to change contracts.

• More clumsy links between data collection and data entry and management.

• Difficulties integrating program planning and service delivery.

• AFMA managers, MACs and RAGs have reduced access to observers.

• AFMA may need to manage several contracts depending on the number of companies employed.

Third party contracting

• Market competition can drive more rapid cost efficiencies.

• External providers could potentially deliver higher standards compared to current AFMA model.

• All the costs addressed in government-contractor model (above).

• AFMA has minimal control over the Program.

• The ability for AFMA to evaluate

24

Service delivery model

Benefits Cost

• Faster, integrated access to new monitoring technology.

• Wider links to expertise through marketplace associations.

• Companies may be better able to respond to fluctuating data and labour requirements. Frees AFMA from the day-to-day responsibility of the Program; frees up time and resources to focus on other core priorities.

• Program may not be constrained by government procedures.

and influence contractor performance is limited because there is no contract between the two parties.

• May create the appearance of conflict of interest.

• Unclear how other agencies, such as the Department of Sustainability, Environment, Water, Population and Communities, would respond to this arrangement.

• Managers, MACs and RAGs have minimal access to observers.

This report was unable to identify any international examples which closely mirror Australia’s observer delivery model. This is unsurprising as observer services are typically shaped by different needs and local contexts. New Zealand’s observer program most closely resembles AFMA’s Program, and is undergoing similar drivers to consider alternative service delivery models (see Case study , page 27). This report was unable to identify any reviews of observer programs that have transitioned from in-house to external provision.

The international outsourced observer programs described in Table 6 demonstrate that governments can select which responsibilities are retained in-house, and which are contracted to external companies. In some fisheries, observer services are delivered by several companies, which can be more cost effective because it utilised competition. However, there is a risk that, in tailoring their services to more closely meet industry’s needs, service providers neglect data quality (Black, 2010, p. 30), or competition causes companies to undercut payment to the point that observers leave the industry (as seen in the United States, described by Bache and Evans, 2003, p. 14).

Table 6 International examples of outsourced observer service delivery models. Location Program/Fishery Government-

contractor model

Third party contracting

Single/multiple service providers

Description

British Columbia, Canada10

Groundfish fishery X Multiple service providers

Government-certified service providers are selected through a competitive bidding process. A single provider delivers services for an entire fishery or fleet group, and industry associations contract providers directly.

Canada11 Pacific Groundfish At-sea Observer Program & Trawl Groundfish Dockside Monitoring Program

X Single service provider

Government contracts a single company to deliver all aspects of observer deployment (including recruitment and training) and data management.

Alaska, USA12

North Pacific Groundfish Program

X Multiple service providers

Multiple government-certified companies compete daily to provide observer coverage for industry clients. It should be noted that reviews identify this arrangement as the cause of problems.

USA13 Pacific Drift Gillnet Fishery

X Single service provider

Government retains responsibility for observer training and auditing contractors. The contracted company is responsible for observer recruitment, deployment, and data delivery.

10 McElderry, H & Turris, B 2008, p. 13. 11 Black, 2010, p. 17. 12 MRAG Americas Inc, 2000; Bache & Evans, 2003. 13 MRAG Americas Inc, 2000; National Oceanic and Atmospheric Administration, n.d.

Location Program/Fishery Government-contractor model

Third party contracting

Single/multiple service providers

Description

USA14 Northeast Fishery Observer Program

X Single service provider

Companies are competitively employed on one-year contract (with four-option-years), and are responsible for observer recruitment, employment and deployment.

14 Black, 2010, p. 9.

27

A decision to market test the Program would enable AFMA to explore the feasibility of altering the Program’s service delivery model, and would align with AFMA’s objectives of cost-efficient fisheries management (AFMA, 2012). However, market testing would obviously consume AFMA resources and staff time. Therefore, before a decision to market test is made, there should be a high degree of confidence that outsourcing is, in fact, feasible.

New Zealand’s Ministry for Primary Industries delivers an in-house observer program similar to AFMA’s Program. Fixed-term contracted observers collect fishery data and compliance-related information, and the cost is largely recovered from industry. Unlike AFMA observers, observers in New Zealand may perform a limited compliance-related role in some situations.

As part of initiatives to improve the economic performance of the seafood sector, the Ministry is considering adopting a government-contractor model to deliver some parts of the observer program. Sea days that do not have a compliance component (that is, days purely dedicated to data collection) may be outsourced to one or more external companies. The Ministry called for Registrations of Interest in May 2013, a process similar to the market testing that AFMA is considering. Integrity and independence are critical features of the observer program. Potential providers of observer services will need to demonstrate how they satisfy the requirement for independence and manage any potential conflict of interest.

If the decision to outsource some observer services goes ahead, the Ministry aims to have externally sourced observers on vessels from mid-late 2014. The amount of externally delivered coverage may gradually increase over time, and the Ministry’s role would change to include auditing service providers.

The Ministry expects that outsourcing will deliver several benefits, including:

• Increased professionalism and flexibility in the delivery of observer services • Improved quality and integrity of information and data • Enhanced transparency in the delivery of observer services • Cost efficiencies • Better alignment of industry and Ministry expectations of observers and their costs

The consideration of outsourcing has received some negative media attention concerning the quality of data external observers can deliver (One News, 2012).

Case study New Zealand considers a government-contractor model for observer services. Sources: One News, 2012; Ministry for Primary Industries, 2013.

28

Table 7 presents a benefit, cost and risk assessment of outsourcing the administration and observer components of the Program. The information presented in this table is not exhaustive but represents the key themes that emerged during consultation with AFMA staff and state government employees who are experienced in delivering fishery observer programs (see Appendix C for a list of stakeholders contacted).

29

Table 7 Benefit, cost and risk assessment of outsourcing the Program’s administration and observer components. The identified benefits, costs, risks and consequences presented here are not exhaustive but draw on the key themes from consultation with AFMA staff and state government employees who have experience delivering observer services. Key risks are explored in detail in 3.2 Risks of outsourcing, page 32. Program component Benefits of outsourcing Costs of outsourcing L15 Risks of outsourcing C16 Risk mitigation strategies Observer recruitment and training

• Recruitment may occur faster than government recruitment processes.

• Training may be more cost-effective than in-house training.

• AFMA and external companies may vary in the skills they desire in observer candidates.

• Training may not include skills AFMA considers important.

• Training costs can become expensive if there is high staff turnover.

3 • Observers may not have the same skills as AFMA observers; observers may be unable to collect data to AFMA’s desired standards.

• Lack of commitment to AFMA goals and objectives because observers are not AFMA employees.

3 • AFMA specifies to external companies the basic qualification levels, skills and training external observers must possess.

• AFMA contributes to the development of training sessions.

Observer deployment (including logistics, equipment provision, payment)

• Greater ability to meet increased observer coverage at short notice, and respond to peak periods of activity (e.g. good weather conditions) because of faster recruitment processes.

• Frees up AFMA’s time to focus on other functions.

• Short term priority changes to coverage levels may require contract changes.

• External companies may not understand the particularities of each fishery’s requirements

• Potential deployment of inappropriately skilled observers.

3 • AFMA incurs fees associated with contract changes.

• Poor data collection. • AFMA reputation is damaged • AFMA may have primary duty of

care responsibility in relation to the workplace health and safety of external observers.

• AFMA’s duty of care may extend to outsourced observers.

2 • Thorough pre-season planning of coverage levels to prevent unnecessary contract changes.

• Extensive consultation with service provider regarding each fishery’s requirements.

• Audit of provider’s processes. • Comprehensive safety training for

observers to minimise injuries; contractual obligations could shift liability to contracted companies.

• Further investigation re: duty of care and possible insurance requirements.

Biological data collection (at-sea and port-based)

• Can be more cost-effective than AFMA observers.

• Perceived independence of data may increase some stakeholders’ confidence in data integrity.

• May deliver poor or variable data quality.

• Perception of observer bias affecting data collection or reporting (e.g. reporting bycatch of TEP species); employment incentive structure could encourage observer bias.

• Lack of industry acceptance for external observers; potential cultural conflict using international observers.

• Contracted companies may have different information privacy standards to AFMA.

3 • Reduced data quality leads to diminished accuracy of stock assessments and more risk prone fishery management decisions.

• Stakeholder concern regarding data integrity.

• Diminished levels of social license within the broader community for externally provided observer services.

• Reduced acceptance of observers on vessels and resultant impacts on data collection.

• Contracted companies may leak sensitive data to third parties.

4 • AFMA involvement in data quality checks

• AFMA could evaluate and authorise each service provider and individual observers

• Incorporate standards and performance assessment into contracts; options to terminate contracts if breached. AFMA maintains auditing role to manage contractors’ performance.

• Specify conflict of interest standards for contractors

• As with the current Program, external observers could be rotated amongst fisheries to reduce the change of observer bias.

• Establish severe repercussions for

15 L- Likelihood rating: (1) Rare, (2) Unlikely, (3) Possible, (4) Likely, (5) Almost Certain 16 C- Consequence rating: (1) Insignificant, (2) Minor, (3) Moderate, (4) Major, (5) Severe

30

Program component Benefits of outsourcing Costs of outsourcing L15 Risks of outsourcing C16 Risk mitigation strategies bias behaviour.

• Strong support system for observers; debriefing sessions to address issues.

• Communicate the performance of contracted companies to stakeholders to allay concerns.

• Collaborate with industry to address concerns before a new service delivery model is implemented; build a sense of ownership to enhance industry acceptance.

• Bind service providers with privacy of information requirements.

Collection of operational information

• Can be more cost-effective than AFMA observers.

• Observers may be unfamiliar with fisheries legislation.

• Inexperienced observers may not realise that seemingly innocuous information can help AFMA operations.

• Observers do not report operational information in a timely manner.

• Perception of observer bias affecting the collection and dissemination of operational information and reporting transgressions.

3 • Reduced reporting on legislative transgressions.

• Decreased operational information provided to AFMA Intelligence.

• Time-lag for operational information to be communicated to AFMA.

3 • Observer training packages include legislation training.

• Encourage observers to be vigilant for operational information that can assist other AFMA sections.

• Specify timeframes for information delivery.

• Specify conflict of interest standards for contractors.

• Establish severe repercussions for bias behaviour.

• Provide a strong support system for observers; debriefing sessions to address issues.

Communicating with vessel operators

• External observers may be seen as a neutral party, and enhance feedback from industry to government.

• Similar to AFMA observers, external observers can be used to deliver information such as identification manuals.

• External observers may fail to capitalise on opportunities to communicate to fishers about fishing regulations and protocols.

• Observers may not communicate messages about AFMA policies that they do not support.

4 • Observers rectify fewer fisher misconceptions or behaviours.

• Potentially fewer messages are communicated to vessel operators.

2 • Emphasise to external companies the role of observers in educating fishers.

• Messages that are frequently communicated to fishers can be incorporated into training packages.

• Debrief with vessel operators after trips to assess if observers are conveying messages.

Post-deployment debriefing sessions

• Frees up AFMA’s time to focus on other functions.

• Time lag for feedback from debriefing sessions to reach AFMA.

2 • It may take extra time for AFMA to become aware of problems, such as ineffective data collection procedures or difficulties with vessel crews.

3 • Contractual obligations specify acceptable time frames to deliver debriefing information to AFMA.

• AFMA can be involved in debriefing sessions to obtain immediate feedback.

31

Program component Benefits of outsourcing Costs of outsourcing L15 Risks of outsourcing C16 Risk mitigation strategies Cost • Potential to reduce costs. • Outsourcing the program could

significantly affect AFMA’s overall budget and levy base.

• Outsourcing the program could lead to a reduction in overhead allocation for cost recovered activities.

3 • It would be managed through a contract that is subject to cost recovery and which would in turn, also attract overheads. This could lead to no discernable reduction in the total cost recovered activities.

• Will alter AFMA’s duties (duties will change to contract management).

3 • Apply overheads to the contract where appropriate.

• Fundamentally alter AFMA’s cost recovery model – ensuring it still complies with whole of government cost recovery guidelines.

32

3.2 Risks of outsourcing The diversity of stakeholders and values connected to the Program means there are several risks surrounding outsourcing. However, the existence of multiple outsourced international observer delivery models suggests that the risks are not insurmountable. This part of the report explores in detail the key potential risks of outsourcing, and potential mitigation strategies. This section should be read in conjunction with the benefit, cost and risk assessment presented in Table 7, page 29.

3.2.1 Delivery of outputs It is uncertain whether all of the outputs delivered through the AFMA Program (see 2.1 Objective and outputs, page 11) can be obtained using external service providers. These considerations are:

1. Fisheries data. External companies may be unable to produce the consistent, high quality data currently delivered by the Program. This risk can be caused by several factors: • Poor recruitment or training standards for external observers; • Biased observer behaviour, for example avoiding certain boats; and • Low observer retention.

Variable data could reduce the accuracy of stock assessments which use it, and depending on the extent and duration of variability, this could potentially have long term consequences for marine resources. Tensions may arise if policy makers, scientists and industry are not confident in the integrity of data used to support fishery management decisions. Poor data quality could also concern the broader community and conservation non-government organisations, resulting in diminished levels of social license for externally sourced observer services.

There are several activities which could mitigate the risk of poor data quality. AFMA can specify minimum qualifications and skills for external observers, and can be involved in the development and delivery of observer training, to ensure contracted observers possess the skills necessary to collect accurate data. The possibility of biased observer behaviour, which is discussed in more detail below, could be reduced using conflict of interest standards and dissuaded using severe repercussions. Further, AFMA could mirror intentions of New Zealand’s Ministry for Primary Industries (see Case study , page 27) and adopt an auditing role to assess and manage the performance of contracted companies. Observer programs worldwide struggle with poor observer retention (highlighted by MRAG Americas Inc., 2000 and Williams, 2008, p. 8). The constant flow of inexperienced observers that this creates reduces the quality and efficiency of data collection (OIPE, 2004, p.19). Contributing factors to this include employment terms, the difficult nature of the job, limited incentives to remain in the profession, and university graduates who only intend to use the role as a platform to move on to other jobs (MRAG Americas Inc., 2000). AFMA can take actions to try and mitigate these by ensuring companies provide strong observer support.

33

A second data related concern is the potential for contractors to mishandle sensitive data and share information with third parties. Anecdotal evidence suggests this may have occurred in an Australian jurisdictional observer program, but confidentiality prevents these details from being discussed. Strict confidentiality standards could be one way to avoid the potential for data mishandling by contracted companies. AFMA has experience in this regard through its contractual arrangement with the data entry business D&S Datafix. 2. Enhanced operational information. The scope of using observers for gathering

operational information could be diminished if observers are privately employed. This risk arises because external observers may be inexperienced with Australian fishing legislation and so are unable to identify and report legislative transgressions. There may also be concern amongst stakeholders that outsourced observers will seek to curry favour with industry by not reporting transgressions they observe.

Further, the detection of some operational information relies on a certain degree of observer vigilance; more experienced staff are better able to identify when overheard, seemingly innocuous information is important for AFMA Intelligence functions. This means that external companies may be unable to deliver some of the operational information collected through the current Program if they have high observer turnover or poor understanding of AFMA’s other functions which utilise operational information. Certainly, comprehensive training for outsourced observers would go some way to ameliorating these potential problems; training would help observers feel more confident in their understanding of fisheries legislation and educate them about the types of operational information to look for during deployments. Also, vigilance for operational information can be encouraged during pre and post-deployment briefing sessions with observers. However, it is hard to determine the potential effectiveness of such techniques. 3. Communication channel. A decision to use external observers could have a positive

impact on the use of observers as communication channels. Some vessel operators may feel more comfortable communicating with external observers if they are perceived to be at arm’s length from government. However, it is possible that outsourced observers could hinder communication between AFMA and vessel operators. External observers could fail to capitalise on spontaneous opportunities that arise to correct fishers’ behaviour or misunderstandings. Additionally, outsourced observers may decide not to convey messages about AFMA policies that they do not support.

Since it is impossible to quantify the importance of this output, the consequences of these risks are unclear. Potentially, observers could be encouraged to facilitate communication during training and debriefing sessions, and talking with vessel operators after each trip could help assess whether observers are conveying messages.

34

4. Government – industry relationship building. The government-industry relationship maintained through the Program would almost certainly be weakened by the loss of AFMA observers. Although there are high level forums, notably the MAC meetings, which allow for industry to interact with government, the value of government interaction at the individual fisher level is also important.

3.2.2 Observer bias Negative incentives exist at the individual observer level which may lead to inaccurate data reports. For example, MRAG Americas Inc (2000, p. 53) note that in some overseas fisheries, observers directly benefit from underreporting bycatch of protected species as this extends the open fishing season and hence the requirements for observer coverage. It is also possible that observers may be intimidated or bribed by vessel crew to falsify reports (Hall, 1999, para. 2.7.4) or ignore legislative infringements (Watling, 2012). Poor pay and working conditions, and few repercussions for inappropriate behaviour, could influence observers’ susceptibility of bribes. Further, because observers have to return to the same boats every fishing season, there may be an incentive to misreport data to curry favour with vessel crew and make working relationships easier. Undeniably, there is potential for bias in any government-provided service. Indeed, some people may perceive that the familiarity between AFMA observers and vessel operators could potentially encourage observers to ignore fishery transgressions. To mitigate this risk, Administration rotates observer deployment so that individual observers do not work exclusively on the same boats. Further, the repercussions that exist for government observers exhibiting biased behaviour, together with debriefing sessions and data quality checks, can provide stakeholders with confidence that this is not a systemic problem. These techniques could be used to reduce the possibility of bias behaviour in external observers. The processes AFMA currently adopts to manage the potential for observer bias when accrediting data collection agencies for the sub-Antarctic fisheries offer could also be used to mitigate potential contracted observer bias. The use of strict conflict of interest standards is a sensible starting point, and a method common to other outsourced observer models (CCSBT, n.d; MRAG Americas Inc, 2000). Strict repercussions for both contracted agencies and fishing companies in the event of improper dealings could also dissuade bias behaviour. This includes the loss of contract for external companies and the permanent loss of access to the fishery for fishing companies (MRAG Americas Inc, 2000). Electronic monitoring cameras might also deter biased observer behaviour. It is unknown whether the mitigation options identified here will generate the same level of stakeholder confidence for contracted companies that AFMA observers currently enjoy, and at a minimum, it would take some time to do so.

35

3.2.3 Industry acceptance Industry calls for external service providers are driven by anticipated cost-efficiency, but it is unclear whether this will translate into acceptance of external observers by individual vessel operators. Fishers’ perceptions of external observers’ abilities could undermine effective working relationships with contracted observers, and cultural differences could potentially play a role if international companies were engaged. Potentially, industry could boycott one observer supplier in preference for another, which occurred in Alaska when there were multiple service providers available (Bache & Evans, 2003, p.17). It is difficult to predict the likelihood and consequences of this risk occurring. The topic is given special consideration here because social risks are often overlooked when making business decisions. A process of genuine engagement with industry to identify and address concerns can help build industry ownership and acceptance of changes to the Program.

3.2.4 Loss of Australian jobs Outsourcing the Program could potentially redirect employment to international businesses and workers, a prospect that has understandably drawn concern from AFMA staff in two sections. As a government agency, AFMA’s contracting of a company which may employ foreign observers could draw criticism from the broader community, and some elected officials. There is considerable concern from Program staff regarding their job security. This is reflected both in consultation with AFMA staff and the interest the Community and Public Sector Union17 have shown in the market testing process. Whilst a decision to proceed with market testing has not yet been made, uncertainty surrounding job security may reduce observers’ productivity.

3.2.5 Changes to AFMA’s budget and duties Outsourcing the Program could significantly affect AFMA’s overall budget and levy base. Of particular concern is, in the event of outsourcing, what would happen to the overheads currently allocated to the Program. Calculating an exact figure the effect outsourcing the Program, or part thereof, would have on AFMA’s budget is complex and beyond the scope of this report but it would need to be done should market testing occur. However, two points worth noting are outlined below. Firstly, outsourcing the Program could lead to a reduction in overhead allocation for cost recovered activities. This is because overheads are allocated based on aggregates; less direct budget and less direct staff employed in the administration of the Program itself would result in a reduction of overhead allocation to cost recovered activities. However, these overhead costs might still remain for AFMA, at least in the short term, and an issue may arise for AFMA’s budget position in that not enough revenue is collected to offset those costs.

17 The Community and Public Sector Union is a party to AFMA’s Enterprise Agreement and represents staff on issues that affect working life, including protecting jobs and rights.

36

Secondly, under the AFMA CRIS the Cost Recovery model works by allocating overheads to the direct FTE and direct budgets or actual expenditure. If AFMA outsourced the Program, or part of it, it would be managed through a contract that is subject to cost recovery and which would in turn, also attract overheads. This could lead to no discernible reduction in the total cost recovered activities as essentially overheads shift from the Program to Fisheries management. Outsourcing will also alter AFMA’s duties. AFMA would need to manage one or more contracts with external service providers; if AFMA adopts a third party contracting model it would need to manage the process of accrediting external companies. With any form of outsourcing, AFMA would need to adopt an auditing role to monitor the quality of contractors’ performance and fulfilment of contractual obligations. This could require additional layers of management, which will of course incur a cost. Further, flexibility to respond to changing demands could be reduced or become costly to maintain through third party contracting if changes to contracts are required. The extent of AFMA’s duty of care responsibility in relation to the recently amended workplace health and safety Act and its implications for outsourced observers also requires further investigation. Under the Work Health and Safety Act 2011 and the Work Health and Safety Regulations 2011, ‘workers’ includes employees of contractors and subcontractors, and the term ‘workplace’ encompasses any location where workers are engaged in a work activity (Comcare, n.d., part 2). This suggests that the primary duty of care for outsourced observers rests with AFMA. Risk mitigation such as ensuring observers complete comprehensive training (e.g. sea safety training) can reduce the risk of staff injuries and should be included in contractual obligations.

37

Section 4: Recommendations This report recommends that:

1. This report be used as the key source of information on the AFMA observer program if a decision is made to market test the program. Other reliable sources of information may also be used;

2. Should market testing go ahead, the Evaluation Panel needs to be well informed of the issues identified in the report by the Steering Committee when assessing applications for market testing;

3. Should market testing proceed the current Steering Committee be reformed as an internal Reference Group;

4. The Reference Group’s duties include providing support and/or advice to any market testing process; and

5. That the Reference Group work closely with the Evaluation Panel to draft the criteria for market testing noting that getting the criteria right is critical and that their development should be carefully considered.

38

Appendix A: History of changes to the Program The Program began in 1979 with the establishment of the 200 nautical mile Australian Fishing Zone. The Program was initially situated within the then Commonwealth Department of Primary Industry and Energy (now the Department of Agriculture, Fisheries and Forestry). From 1979 – 1989 the program focused on verifying logbook data of fishing operators, principally in the tuna fisheries under the Bilateral Agreement between Australia and Japan (described by ACIL Consulting, 1998) to achieve a more reliable stock assessments and thus improved fishery management. In 1992, full responsibility for the program was transferred to the newly established AFMA, from which point the program gradually concentrated on domestic fishing activity. By 1998-1999 the Program was solely focused on domestic fishing activity as bilateral fishing arrangements with Japan had ceased. In December 2005, the then Minister for Agriculture, Fisheries and Forestry, issued a formal direction to AFMA to address overfishing and prevent overfishing in the future. Specifically, it directed AFMA to “Enhance the monitoring of fishing activity, for example through increased use of vessel monitoring systems with daily reporting on-board cameras, and observers”. The Program adapted to meet these new requirements, and its function moved from log book verification to research. The scope of the Program was largely focused on gathering information on target species. In the 1990s, the federal agency responsible for the environment increased its focus on the environmental impacts of fishing, and the EPBC Act was enacted. This, together with the implementation of Ecological Risk Management in Commonwealth fisheries drove the demand for information about fishery interactions with TEP, bycatch and discard species. The Program again adapted to new requirements, and observers’ roles expanded to collect species interaction data which contributed to ecologic risk assessments. Beginning in 2005, AFMA explored the potential of electronic monitoring to contribute to monitoring needs through a series of trials. AFMA introduced electronic monitoring as a business-as-usual function in the gillnet sector of the Southern and Eastern Scalefish and Shark Fishery, and is looking to implement the technology in the Eastern Tuna and Billfish Fishery (AFMA, 2011). Electronic monitoring is facilitated through recent amendments to the Fisheries Management Regulations 1992, and policies such as the Fee for Service Policy (introduced in July 2013).

39

Appendix B: Program roles in each fishery The Program is tailored to meet the individual data needs of each fishery as identified by RAGs, MACs and fishery managers. Table 8 details the sea days delivered through the Program for the financial year 2011 – 2012, and the target sea days for the financial year 2012 – 2013. Note that the number of high seas fishing days cannot be predicted and so does not have a sea day target. For each fishery, the Program collects the data outlined in Table 9 together with the fishery-specific data described in Table 10. Table 8 The Program’s target sea days for 2012 – 2013 and the total sea days delivered in 2011 – 2012.

Fishery

Sea days target 2011 - 2012

Total days 2011 - 2012

Sea days target 2012 - 2013

Bass Strait Central Zone Scallop 20 18 10 Commonwealth Trawl Sector (Blue Grenadier spawning season) 46 61 46

Coral Sea 30 24 30 Eastern Tuna and Billfish 550 616 550 East Coast Deepwater Trawl 40 56 40 Heard Island and McDonald Island 480 603 480

High Seas Not applicable 367 Not

applicable ISMP Gillnet, Hook and Trap sector (autoline) 104 125 104 ISMP Gillnet, Hook and Trap sector (bottom longline) 42 17 42 ISMP Gillnet, Hook and Trap sector (dropline) 5 0 5 ISMP Gillnet, Hook and Trap sector (gillnet) 431 408 431 ISMP Great Australian Bight 24 33 35 ISMP South East Trawl 204 257 126 Macquarie Island 70 153 70 Northern Prawn 151 184 186 North West Slope Trawl 44 46 15 Small Pelagic Fishery 15 0 15 Southern Bluefin Tuna 90 40 90 Torres Strait Prawn 40 48 40 Western Deepwater Trawl 25 0 25 Western Tuna and Billfish 20 22 50 TOTAL 2431 2645 2390

40

Table 9 Observer data collected in all fisheries, 2011-2012. The general data outlined here is collected in addition to the fishery-specific data outlined in Error! Reference source not found.. Data collected Description of data Biological data The biological data collected varies between fisheries

and can include: • Length, weight, sex • Life status and fate • Presence of research tags • Otolith and vertebrae samples • Life stage • Processing codes

Catch composition • The proportion of different species in each catch Conversion factors • Conversion factor between catch and processed

amount Gear details • Measurements of gear Hospitality • Details conditions on the boat relating to the crew and

their attitudes to observer work • Accommodation and food quality

Length frequency • Length measurements for target species Marine pollution • Disposal of waste at sea

• Oil discharge/spills Shot details

• Target Species • Bait used • Catch retained/discarded • Percentage of observer coverage • Gear damage • Reasons for shot • Shot outcome

Vessel details

• Crew details • Electronic equipment • Boat specifications

Vessel activity

• Date, time and position of operation • Meteorological data • Offal discharge

Voyage summary • Summarises trip length and effort Wildlife abundance • Five minute snapshot of all wildlife abundance during

differing periods including seabirds and mammals Wildlife interactions

• Detailed data relating to interactions with TEP species

Wildlife mitigation • Assessment of mitigation devices and procedures Workplace health and safety • Safety induction checklist

41

Table 10 Fishery-specific data collected by the Program during the financial year 2011-12. Fishery-specific data is collected in addition to the general data described in Error! Reference source not found., Error! Reference source not found.. Fishery Data collected At-sea/port-based

sampling E-monitoring End use for data

Bass Strait Central Zone Scallop • Length Frequency • Catch Composition

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs.

Coral Sea • Biological data • Otolith collection • Length frequency • Catch composition

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs.

Eastern Tuna and Billfish Fishery • Biological sampling of all catch, including length and sex

• Life status • Monitoring Bluefin tuna catch for high

grading • External research projects (sunfish,

swordfish, 60 gram swivel)

At-sea sampling Available in June 2013

• Reports go to fishery managers, MACs and RAGs • International reporting obligations.

East Coast Deepwater Trawl/High Seas/Blue Grenadier spawning season

• Tagging (fish and skates) • Otolith collection • Conversion factor testing • Thaw tests • Sink rate testing • Camera work • Biological data • 100% coverage • Catch composition • Length frequencies

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs, and the Australian Antarctic Division data collection.

• International reporting obligations (CCAMLR).

Gillnet, Hook and Trap sector (autoline/dropline)

• Biological data • Otolith collection • Length frequency • Catch composition

At-sea sampling/Port Sampling Otolith Length Frequency

Available • Reports go to fishery managers, MACs and RAGs.

Gillnet, Hook and Trap sector (gillnet/bottom longline)

• Biological data (every fish) • Vertebrae collection • Length frequency • Catch composition

At-sea sampling/Port Sampling Otolith Length Frequency

Not available • Reports go to fishery managers, MACs and RAGs.

Great Australian Bight • Biological data • Otolith collection • Length frequency • Catch composition (extrapolated

catch)

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs.

Northern Prawn Fishery/Torres Strait Prawn Fishery

• Length frequencies of commercial prawn species

• Catch composition using bycatch sub-samples

• TEP interactions (sea snakes, turtles and pipefish)

• Documentation of species of interest

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs

42

Fishery Data collected At-sea/port-based sampling

E-monitoring End use for data

North West Slope Trawl • Biological data • Otolith collection • Length frequency • Catch composition

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs.

Small Pelagic Fishery • Biological data • Otolith collection • Length frequency • Catch composition

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs.

South East Trawl • Biological data • Otolith collection • Length frequency • Catch composition (extrapolated

catch)

At-sea sampling and port sampling of otoliths and length frequency

Not available • Reports go to fishery managers, MACs and RAGs.

Southern Bluefin Tuna • Biological sampling of all mortalities, length and sex

• Life status • Monitoring mortalities

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs • International reporting obligations.

Southern Oceans • Tagging (fish and skates) • Otolith collection • Conversion factor testing • Thaw tests • Sink rate testing • Camera work • Biological data • 7 days per week 12 hour • 100% coverage • Catch composition • CCAMLR requirements • Length frequencies

At-sea sampling Not available • International reporting obligations (CCAMLR). • Reports go to fishery managers, MACs and RAGs. • Australian Antarctic Division data collection

Western Deepwater Trawl • Biological data • Otolith collection • Length frequency • Catch composition

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs.

Western Tuna and Billfish Fishery • Biological sampling of all catch, including length and sex.

• Life status • Monitoring Bluefin tuna catch for high

grading. • External research projects

At-sea sampling Not available • Reports go to fishery managers, MACs and RAGs • International reporting obligations.

43

Appendix C: Individuals and organisations contacted Table 11 lists the people and organisations contacted for information in the development of this report. Table 11 Individuals and organisations contacted. Name Organisation Role Federal government Steve Bolton AFMA Senior Manager,

Northern Fisheries & Co-management Section

Ross Bromley AFMA Assistant Senior Fisheries Management Officer, Demersal and Midwater Trawl Section

Chris Burns AFMA Senior ISMP Planning Officer, Observer Program

Julie Cotsell AFMA Administrator, Observer Program

John Garvey AFMA Data Manager, Intelligence, Planning & Data Management Section

Steve Hall AFMA Observer, Observer Program

Libby Jenkins AFMA Senior Manager, Human Resources Section

Justine Johnston AFMA Australian Technical Coordinator, CCAMLR Observer Program

Tony Lawless AFMA A/g Chief Financial Officer Finance Section

Peter Neave AFMA Manager, Antarctic Fisheries Section

David Power AFMA A/g Manager Gillnet, Hook & Trap and Squid Fisheries, Demersal & Midwater Fisheries Section

Phil Ravanello AFMA National Intelligence Manager, Intelligence, Planning & Data Management Section

Jeremy Richter AFMA Senior Manager, Service One

Paul Ryan AFMA Environment Manager, Policy, Environment, Economics & Research Section

Martin Scott AFMA Foreign Compliance Officer, Fisheries Operations Branch

44

Name Organisation Role Anne Shepherd AFMA Manager,

Licensing and Data Services Section Evelyn Walden AFMA Manager Human Resources,

Human Resources Section Sally Weekes AFMA Senior Fisheries Management Officer,

Policy, Environment, Economics & Research Section

Mike Yates AFMA Manager, Observer Program State & territory governments Dr James Andrews Fisheries Victoria,

Department of Environment & Primary Industries, Victoria

Leading Scientist Aquatic Sciences & Technical Services, Fisheries Management & Science Branch

Douglas Ferrell Department of Primary Industries, New South Wales

Manager, Resource Planning Group

Dr Ross Quin Fisheries Queensland, Department of Agriculture, Fisheries & Forestry, Queensland

Manager, Fisheries Information & Science Coordination

Dr Rick Fletcher Department of Fisheries, Western Australia

Executive Director, Research

Dr Thor Saunders Department of Primary Industries & Fisheries, Northern Territory

Researcher, Fisheries Research Team

Annabel Jones Department of Primary Industries & Regions, South Australia

Program Leader, Commercial Fishing

International governments Neville Smith Ministry for Primary

Industries, New Zealand

Principle Scientist, Fisheries Management Directorate

Australian fishing industry Trixi Madon *contacted but has not yet provided information on industry concerns

Commonwealth Fisheries Association

Chief Executive Officer

45

Appendix D: Extract of Hansard The following extract of Hansard contains Senator Colbeck’s queries regarding the Programs cost during Senate Estimates on 22 May, 2012. At this meeting, the AFMA Chief Executive Officer (Dr Findlay) expressed willingness to market test the Program and adopt cheaper and more effective Program alternatives (lines 44 – 46). Hansard extract 1: The Program’s cost was queried during Senate Estimates and the AFMA Chief Executive Officer expressed willingness to market test the Program (lines 44 – 46). Source: Commonwealth of Australia 2012, pp. 17 – 22. Senator COLBECK: I will just go to the observers and how you calculate the cost for an observer. Dr Rayns: It is quite a process. Briefly, we work out a daily cost. The current cost is around $1,100 to $1,200 a day for an observer. In broad terms, the observer receives around $450 a day. Then there is also the at-sea allowance for each day they are at sea. Remember that we pay our observers for some of their travel time to distant ports as well as at-sea time. When they are at sea, they receive an at-sea allowance of $215 a 5 day. So that is their main component. On top of that, we have the costs of administering the program. We have several staff who have essentially to deploy the observers, make sure they receive training and so forth. For example, our training budget at the moment is around $130,000 or $140,000 a year. That is because they require training in safety at sea, first aid, conflict resolution, data collection, including on otoliths, and so forth. They need to know how to handle knives safely on board fishing vessels, because you have to dig the 10 otolith out of the fish et cetera. So there is a lot of training involved for observers, which is part of the cost. So we have those key components—what the observer gets, the administration of the program and training. On top of that, we have the normal distribution of overheads in the agency to the staff concerned, as Mr Bridge mentioned, on a particular basis using certain classifications of overheads. Some of them are applied to observers and others are not because they do not take up space in our office, for example, but they do 15 require services from our HR and finance people. So they pay essentially some of those overhead costs but not all of them. Senator COLBECK: So your direct costs are about $665? Dr Rayns: Nearly $700 a day in round terms, yes. Senator COLBECK: Then you have $400 to $500 for overheads on top? 20 Dr Rayns: We have about $500 for FTEs who have to manage and oversee the program, organise training and so forth and deploy the observers et cetera. They come on top of that, and then we have corporate overheads on top of that again. Senator COLBECK: So if we say about $700 a day direct costs and about $400 to $500 a day overheads? Dr Rayns: But they are very different types, because some of that is the oversight of the program—25 deploying observers and so forth. The other part of the overheads are the overheads as described by Mr Bridge. Senator COLBECK: So some direct management and some overhead? Dr Rayns: Yes. That is correct. The exact split of that, unfortunately, I do not have in front of me but I can get for you, if you wish. 30 Senator COLBECK: I would be interested to see how that is made up. The comparison has been given to me. I know it cannot be given as a direct comparison because things are different, but my understanding is that the cost in New Zealand for an observer is something like $600 a day on a New Zealand boat. Dr Rayns: We are aware of those comparisons. We test our observers in the marketplace from time to time. Indeed, the Northern Prawn Fishery went out last year and did a market test and decided not to proceed 35 because AFMA was still better value. They are going out again this year, I understand, in the next two or three months. Senator COLBECK: What do you mean by market test? Dr Rayns: We basically go out and see if we can find another party who can deliver our observer services to the standards that we require more cost effectively and give value for money. 40 Senator COLBECK: A private third-party provider, effectively?

46

Dr Rayns: Yes. That is right. We have done that in the past and we continue to do that. Dr Findlay: We are focussing on the observer side of the business. We are in the evidence based decision-making business and we need the data. If we can get that data more cheaply and more effectively, then we will do so. As Nick mentioned, we have tested our observers a number of times in the marketplace and they 45 have performed reasonably well on four occasions. We are happy to go and have a look again. Obviously, that will incur a cost, but it is something we are doing to keep costs down. We need to be a little careful here that sometimes the numbers that are quoted do not compare apples with apples. Senator COLBECK: I was trying to make the point that you could not make a direct comparison. I know through other inquiries I have been in that there is a significant wage difference, for example, between here 50 and New Zealand, so there is one cost that cannot be directly applied to start with. But I am interested in the fact that there is a process or a capacity for a direct private-market test as part of the process. I appreciate that. In how many fisheries are observer costs additional to the statutory fishing rights? In any circumstance are they actually built into the costs relating to the fishery? Dr Rayns: Yes, they are. The observer costs in most fisheries are applied through the levy base. We do have 55 in some fisheries fee-for-service arrangements, which apply in a small number of fisheries. We flagged with the Commonwealth Fisheries Association our intention to increase the level of fee-for-service arrangements we have in our fisheries. But, at the moment, the vast bulk of our observer costs are part of the overall levy for the fishery. Senator COLBECK: How does that work? You would have to have some sense within the overall 60 calculation of the number of days that the boat would be at sea? Dr Rayns: We work with the scientists. This data is extremely important for us in terms of getting information on which to base the stock assessments and interactions with endangered species and so forth that we report to SEWPaC. We plan every year in advance, so we work out with the scientists, managers and the industry how many days of observer coverage we require in each fishery and, indeed, each sector of each 65 fishery. Senator COLBECK: So it is not determined by how many days a boat is at sea? It is determined by how many days of observer coverage you see that you need to adequately collect the data you want on that fishery? Dr Rayns: Yes. Along the lines Dr Findlay said, this is about getting the right information to make 70 decisions. It is not just about going out on boats at a particular point. Senator COLBECK: So in some fisheries, you might make a calculation that you want 20 per cent observer coverage? In others, you might make the decision you want 100 per cent? Dr Rayns: That is correct. It depends on the issues we are trying to deal with through our observer program. You are right; some fisheries have observer coverage as low as four or five per cent and others have it as 75 high as 100 per cent in some sectors. Senator COLBECK: Would the decision around that particular matter determine the way that it was charged—whether it was applied as a component of the SFR or whether it was applied separately? Dr Rayns: In part. We tend to look at it also in terms of ease of application. For some of our fisheries where we have a very few number of players—a good example, I guess, is Heard and McDonald islands and some 80 of those sort of fisheries—we tend to go to fee-for-service because it is easier to deal with a few players. When we have 50 to 100 in a fishery, often we have to be careful in the administration of separately collecting a whole lot of individual invoices from fishermen who may have had an observer on their boat. Our way is essentially applying the levy. Sometimes it can be more cost efficient just to apply it through the levy rather than through fee-for-service. 85 Senator COLBECK: So incorporated into some of the figures that you have given us in tables 1 and 2 would be a component for observer coverage? Dr Rayns: Yes. In terms of the levies charged, yes, indeed. Senator COLBECK: On notice, can you give us— Dr Findlay: I think we can probably do it now for you, Senator. My recollection is the number is about 25 90 per cent of the 2012-13 budget is currently attributed to observers. Senator COLBECK: I was interested in which ones have it embedded and which ones have it charged separately. Dr Findlay: We can probably do that now as well. I might hand over to the Chief Financial Officer to talk you through those numbers. 95

47

Ms Howitt: In the gillnet, hook and trap, for the budget for the next year, we have around at the moment—again, these are draft figures—$90,000 of direct. Heard and McDonald islands is around $280,000. Macquarie Island is around $40,000. Eastern tuna and billfish is around $24,000. They are the only ones at this stage with observer fee-for-service. Dr Findlay: The remainder would go into the levy base. We can talk you through those numbers, if that 100 helps. Senator COLBECK: So the remainder go into the levy base. Are these ones externally charged? Those four that you have just given me are— Dr Findlay: They are charged on a fee-for-service basis. Senator COLBECK: Separately invoiced? 105 Dr Findlay: We would separately invoice the individual companies. The remainder of the observer coverage—some 5,000-odd days from AFMA observers— Dr Rayns: It is about 2½ thousand. Dr Findlay: About 2½ thousand days—before the industry gets very scared—is charged through the levy base. That is done as an aggregate figure spread across all levy payers. 110 Senator COLBECK: So if you go to the gillnet, hook and trap, you are looking at recovering $2.455 million? Ms Howitt: Yes. Senator COLBECK: It is a notional number at the moment. It is not a final number. Would there be a component for observer coverage built into that number? If that is based on days, how do you ensure that 115 you cover that? Is that where the over and under recovery stuff comes back in again? If it is a poor season, the boats do not spend as much time out. Does that become part of what you do not recover? Dr Rayns: Yes. In short, generally, we have been running the program in the south-east for nearly 20 years. In some years, if certain sectors do not fish as heavily and others fish more heavily, we have to adjust the program a little during the year. Getting that information is more about getting the coverage right than it is 120 about anything else. So it can be that at the end of a financial year we have had more observer days in a particular sector if they are particularly active and perhaps fewer days in a sector that may be less active. But overall those issues are quite minor. Certainly my experience over the last 15 or 20 years is that our observer program and the industry work very closely together with the scientists through our resource assessment groups to make sure they balance those things out during the year. We do get a bit of unders and overs in 125 observers—that does happen in some years—but it is usually fairly manageable. Senator COLBECK: So your general knowledge of the industry and how it works and how it operates— Dr Rayns: That is just mine. But working closely with the industry is an important thing. We work very closely with them. Senator COLBECK: So that actually means that you have a better chance of getting closer to the mark as 130 far as the overall numbers are concerned? Dr Rayns: That is correct. Senator COLBECK: What does the $215 at-sea allowance cover? Dr Rayns: It is an at-sea allowance for being on a fishing boat away from port. I do not know how experienced you are, but being on a fishing vessel can be a fairly arduous business. Some of these vessels go 135 to sea for weeks or sometimes months, if you are dealing with the Heard and McDonald islands fisheries. Others are only out for a day or two. That allowance is to reflect, I guess, the arduousness of the conditions that the observer is working in. It is a fairly standard allowance. I am not sure whether James or my corporate colleagues can assist, but I think it is a fairly standard allowance across a lot of these sort of sectors where you are working in remote or difficult circumstances. 140 Mr Bridge: We negotiated that rate only recently again in AFMA’s enterprise agreement. It is a quasi overtime and hardship type allowance. Mr Venslovas: I will add that, in the compliance arena, fisheries officers also get a similar allowance when they are deployed on patrol boats for similar reasons. They can be on patrol for up to 40 days at the extreme and for shorter periods in the northern waters. They also get a similar allowance. 145 Senator COLBECK: So this is when they join our— Mr Venslovas: Navy and customs colleagues. Senator COLBECK: Navy and customs vessels down in the Southern Ocean, for example? Mr Venslovas: Exactly.

48

Senator COLBECK: I understand that there are extensive times. Someone sent me an account for about 150 $48,000, so they had been out there for a while. Dr Rayns: Yes. Some of them go for long periods of time. Senator COLBECK: Your point is very well taken in that context. Can you just run me through what proportion of that overall amount—I am not sure we have done that—is research costs of the recovered amount? What is the proportion? 155 Dr Rayns: I might pass that to my corporate colleagues. Ms Howitt: You are talking about the draft budget? Senator COLBECK: Yes. I know they are draft figures. Ms Howitt: Including research administration, it is around $3½ million for the cost recovered budgets. Senator COLBECK: That is out of that total? 160 Ms Howitt: Yes Senator COLBECK: There is a relationship with the states. There are the OCS issues. Do you do any benchmarking with your costs versus the state costs for fisheries management? Dr Rayns: We do, but it is difficult because AFMA’s budget is very transparent from top to bottom, as you would be aware; everybody sees everything. Fisheries agencies are often embedded in larger departments, 165 and I think it is harder for them and us to make comparisons. Also added to that is the different cost recovery arrangements in each of the jurisdictions. We do not all apply the same cost recovery measures. Some are greater and some are to a lesser extent. However, we would say we are aware that probably our closest comparison, if there is one, is WA. We are aware that they run a different model from AFMA but they have a GVP percentage, or gross value of production percentage, they recover from their industry 170 which totals around 5.75 per cent of GVP. Currently, AFMA is running at about 4.6 per cent. Dr Findlay: Just to add to that, the only other comparison we are aware of at the moment is there has recently been a consultant study into scallop fisheries in the south-east of Australia, which compared management costs between ourselves, Victoria and Tasmania. As Nick mentioned, the consultants certainly had troubles getting accurate figures from the other two jurisdictions. But on their probably conservative 175 estimates, in their words, we are substantially cheaper than Tasmania, for example. Over the last five years, we are about 10 per cent cheaper. I know that is a particular interest of yours. Senator COLBECK: What about international benchmarking? Do you have any international benchmarking? Dr Rayns: Not to my recollection. Probably the best comparison again is New Zealand. Unfortunately, their 180 cost recovery model is different to ours. They cost recover things we do not and vice versa. I would probably say in overall terms—and this is only my opinion so please do not take this— Dr Findlay: We did answer this on notice, Dr Rayns. Dr Rayns: Okay, James. Over to you. Dr Findlay: We did answer this on notice. This was one of the questions on notice. I think we provided a 185 written answer along the lines that Dr Rayns is suggesting—that this is hard to do. Otherwise we could give you some speculation, but I am not sure that it is based on too much fact. Dr Rayns: It is actually quite difficult because of the different cost recovery arrangements. Senator COLBECK: My question on international benchmarking was a little different, and I appreciate your answer. You are not aware of any international benchmark. I wonder whether you had a look at 190 anything yourself. Dr Findlay: We look, but it is hard to do direct comparisons because, as Dr Rayns mentioned, our budget is quite transparent. Other countries are less so. Senator COLBECK: You do have a different model to a certain extent as well. I appreciate that that makes some— 195 Dr Findlay: And there is a lot of sensitivities from other countries about subsidies in their fisheries. That is why there is a lot of murkiness around their values.

49

References ACIL Consulting 1998, Role and management of AFMA observer services: a report to the Australian

Fisheries Management Authority, no publisher.

Australian Fisheries Management Authority (AFMA) n.d., The Observer Program, viewed 27 March 2013, http://www.afma.gov.au/services-for-industry/observer-program/

Australian Fisheries Management Authority (AFMA) 2004, Annual Report 2003 – 2004, viewed 30 March 2013, http://www.afma.gov.au/wp-content/uploads/2010/07/ar03_04_00.pdf

Australian Fisheries Management Authority (AFMA) 2008, AFMA Business Efficiency Review Discussion Paper: Cost Efficiency Working Group, viewed 13 May 2013, http://www.afma.gov.au/wp-content/uploads/2010/06/crwg_report_final.pdf

Australian Fisheries Management Authority (AFMA) 2010, AFMA Cost Recovery Impact Statement 2010, viewed 03 June 2013, http://www.afma.gov.au/wp-content/uploads/2010/06/AFMA-Cost-Recovery-Impact-Statement-20101.pdf

Australian Fisheries Management Authority (AFMA) 2011, E-Monitoring, viewed 13 March 2013, http://www.afma.gov.au/managing-our-fisheries/data-collection/e-monitoring/

Australian Fisheries Management Authority (AFMA) 2012, Corporate Plan 2012-2017, viewed 13 May 2013, http://www.afma.gov.au/wp-content/uploads/2012/06/Final-2012-2017-Corporate-Plan-130412.pdf

Bache SJ & Evans N 2003, Fisheries observer programs: lessons from a global review and policy options for Australia, Department of Agriculture, Fisheries and Forestry, Canberra.

Black, B 2010, Observer Services Models Literature Review, The Ministry of Fisheries, Wellington, not published.

Borthwick, D 2013, Review of Commonwealth Fisheries: Legislation, Policy and Management, viewed 25 March 2013, http://daff.gov.au/__data/assets/pdf_file/0006/2270229/commonwealth-fisheries-management-review-report.pdf

Centre for Regional Economic Analysis 1995, A review of the Australian Fisheries Management Authority's Observer Program: A report prepared for the Australian Fisheries Management Authority, University of Tasmania, Hobart.

Comcare n.d., Frequently asked questions, viewed 13 May 2012, http://comcare.gov.au/WHS/guidance_and_resources/guidance/frequently_asked_questions#one

Commission for the Conservation of Southern Bluefin Tuna (CCSBT) n.d., CCSBT Scientific observer program Standards, viewed 08 April 2013,

50

http://www.ccsbt.org/userfiles/file/docs_english/operational_resolutions/observer_program_standards.pdf

Commonwealth of Australia 2005, Details of the Austrailian Government’s direction to AFMA, viewed 23 May 2013, http://pandora.nla.gov.au/pan/37935/20061017-0000/www.mffc.gov.au/releases/2005/afma_directions.pdf

Commonwealth of Australia 2012, Senate Estimates: official Hansard, 22 May, pp. 6 – 38 , viewed 10 May 2013, http://parlinfo.aph.gov.au/parlInfo/download/committees/estimate/e3359f3f-fe51-4a97-9a04-c97a8c52d786/toc_pdf/Rural%20and%20Regional%20Affairs%20and%20Transport%20Legislation%20Committee_2012_05_22_1093_Official.pdf;fileType=application%2Fpdf

Davies, SR & Reynolds JE (eds.) 2003, Guidelines for developing an at-sea observer programme. FAO Fisheries Technical Paper No. 414, viewed 03 June 2013, http://www.fao.org/docrep/005/Y4390E/Y4390E00.HTM

Hall M 1999, ‘Estimating the ecological impacts of fisheries: what data are needed to estimate bycatches?’ in CP Nolan (ed.), Proceedings of the International Conference on Integrated Fisheries Monitoring, 1 – 5 February, Sydney, viewed 10 May 2013, http://www.fao.org/docrep/x3900e/x3900e04.htm

Marine Resources Assessment Group (MRAG) 2006, Observer Programs: best practice funding options and North Sea case study. A report to WWF, viewed 10 May 2013, http://awsassets.panda.org/downloads/observerreportlores.pdf

Marine Resources Assessment Group (MRAG) Americas Inc. 2000, Independent Review of the North Pacific Groundfish Observer Program, viewed 15 March 2013, http://www.afsc.noaa.gov/fma/PDF_DOCS/NPGOP%20Review%20Final%20Report.pdf

McElderry, H & Turris, B 2008, Evaluation of monitoring and reporting needs for Groundfish sectors in New England. Viewed 8 April 2013, http://www.gmri.org/upload/files/GroundfishMonitoringNeedsFinalReportfinal.pdf

Ministry for Primary Industries 2013, Registration of Interest form - 15754: Observer Services, Ministry for Primary Industries, Wellington.

National Oceanic and Atmospheric Administration n.d., Pacific Drift Gillnet Observer Program, viewed 08 April 2013, http://swr.ucsd.edu/pacdgobs.htm

Office of Inspections and Program Evaluations (OIPE) 2004, NMFS Observer programs should improve data quality, performance monitoring, and outreach efforts. Final audit report no. IPE-15721/March 2004, US Department of Commerce, Washington.

51

One News 2012, ‘Govt fishery observers told to get ready to pack up’ One News, 25 March, viewed 27 March 2013, http://tvnz.co.nz/national-news/govt-fishery-observers-told-get-ready-pack-up-4795996

Sainsbury, K 2005, Cost-effective management of uncertainty in fisheries, paper presented at the ABARE Outlook Conference, March 2005, Canberra.

Watling, J 2012, ‘Fishing observers “intimidated and bribed by EU crews”', The Guardian, 18 May, viewed 12 March 2013, http://www.guardian.co.uk/environment/2012/may/18/fishing-inspectors-intimidated-bribed-crews

Williams, G 2008, Review of the AFMA observer program - advice and recommendations on principles, processes and proceedures, no publisher.